A pilot owns a one airplane airline which flies between two cities. The airline makes one daily round trip. The pilot competes with several other pilots also owning a single plane flying the same route and similar schedule. The airline has the following costs associated with the round trip:

Use the information above to analyze whether this competitive firm should fly or shut down in the short-run.

Variable Costs:

Pilot and crew per round trip $3,000

Fuel per round trip 800

Landing fees per round trip 1,000

Fixed Costs:

Daily Depr. on the airplane $1,500

Daily Insurance for the plane 2,000

A) The airline should shut down immediately.

B) The airline should fly in the short-run because it is earning a profit of $1200.

C) The airline should continue to fly in the short-run because the loss inured is less than the

fixed costs. This will minimize the airline's losses in the short-run.

D) The information provided is not sufficient to determine whether the airline should fly in the short run