Problem
I. How should the airline respond when presented with an overweight bag (more than 42 pounds) if an extra 100 pounds imposes $1.8 million per year per flight added cost?
II. Jet fuel prices have now reversed their upward trend and are in a steep decline. Fuel surcharges based on average variable costs have caught up with and surpassed marginal costs. Given the usage of 57 million gallons of jet fuel per week, how should American Airlines respond if marginal cost declines to $15 per suitcase?