An airline charges the following baggage fees 25 for the fir

An airline charges the following baggage fees: $25 for the first bag and $35 for the second. Suppose 54% of passengers have no checked luggage, 34% have one piece of checked luggage and 12% have two pieces. We suppose a negligible portion of people check more than two bags.

(a) Build a probability model, compute the average revenue per passenger, and compute the corresponding standard deviation.

(b) About how much revenue should the airline expect for a flight of 120 passengers? With what standard deviation? Note any assumptions you make and if you think they are justified.

Solution

Probability model

Thus average revenue = 12.7

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b) for 120 passengers Expected revenue = 12.7x 120 = 1524 dollars.