SkyTop Commuter Airline runs a small commuter airline which seats 15 passengers and travels between San Diego and Big Bear Mountain ski resort. They charge $150 per ticket non- refundable and always manage to book the entire plane. Based on experience 80% of the passengers show up for their flight.
A financial officer comes up with the idea that the airline should over book the flight and decides to book 20 seats with the stipulation that if a passenger is denied a seat the airline will refund the passenger $250.
1. What is the expected revenue to the airline if they over book the flight with 20seats?
M= 20 P= .80