Statement–Assumption — “X Airlines has increased passenger fares by 15% with immediate effect.” Assumptions: I) Demand for X Airlines seats may remain largely unchanged despite the hike. II) Other airlines may also increase passenger fares. Choose the implicit assumption(s).

Introduction / Context:Firms raise prices when they expect revenue to increase or margins to improve. That expectation often rests on demand being relatively inelastic (at least in the short run).

Given Data / Assumptions:

• Action: immediate 15% fare hike.
• Market context: not specified for rivals.

Concept / Approach:Assumption I—that demand will not drop enough to negate the price increase—is necessary to justify the hike. Assumption II about rivals is speculative and not required; X could raise fares regardless of competitors, based on its own load factors/positioning.

Step-by-Step Solution:

Verification / Alternative check:Airlines often adjust fares route-wise based on yield management absent industry-wide moves.

Why Other Options Are Wrong:“Only II/either” add unnecessary industry assumptions; “neither” ignores pricing logic.

Common Pitfalls:Assuming price leadership must be coordinated; it need not be.

Final Answer:Only Assumption I is implicit.