Figure 6.4 Japanese Market for Jetliners
-Consider the Japanese market for jetliners as depicted in Figure 6.4.Suppose the lone producer of jetliners in the world is Boeing, which faces a constant marginal cost of $20 million per jetliner.What price will Boeing charge for jetliners in the Japanese market and how many will they sell?

Question

Figure 6.4 Japanese Market for Jetliners 
-Consider the Japanese market for jetliners as depicted in Figure 6.4.Suppose the lone producer of jetliners in the world is Boeing, which faces a constant marginal cost of $20 million per jetliner.What price will Boeing charge for jetliners in the Japanese market and how many will they sell?

Quizplus · Accepted Answer

Boeing will produce and sell in the Japanese market as long as the price is higher than their constant marginal cost of $20 million per jetliner. From the diagram, we can see that the demand curve intersects the marginal cost curve at 46 units of jetliners. At this quantity, the market price is $30 million per jetliner. Therefore, Boeing will charge $30 million per jetliner in the Japanese market and sell 23 units (the quantity demanded at this price).