Economics (AS & A Level) · Oct / Nov 2025 · Paper 31 · Question 2

A small European airline currently produces at point X on its long-run average cost curve (LRAC). It wants a bigger share of the European airline market and proposes to merge with another small European airline. The newly merged firm would produce at point Y on the long-run average cost curve, as shown. [diagram: LRAC curve with points X and Y, axes costs and output] Why might the newly merged firm be able to produce at point Y?

1. AThe new airline can negotiate discounts when buying fuel.
2. BThe new airline has many layers of management.
3. CThe new airline is unable to hire enough pilots.
4. DThe workforce of the new airline lacks morale and is demotivated.

As printed in the paper