A small European airline is presently operating at point X on its long-run average cost curve (LRAC). It is seeking a larger share of the European airline market and suggests merging with another small European airline. The combined business would operate at point Y on the long-run average cost curve, as shown. Why might the merged firm be able to operate at point Y?
- AThe new airline can negotiate discounts when buying fuel.
- BThe new airline has many layers of management.
- CThe new airline is unable to hire enough pilots.
- DThe workforce of the new airline lacks morale and is demotivated.