Figure 6.4Japanese Market for Jetliners

-Consider the Japanese market for jetliners as depicted in Figure 6.4.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner.How much profit will boeing make?

Question

Figure 6.4Japanese Market for Jetliners
 
-Consider the Japanese market for jetliners as depicted in Figure 6.4.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner.How much profit will boeing make?

Quizplus · Accepted Answer

In the Japanese market for jetliners, Boeing faces a demand curve where the price is $250 million per jetliner when it produces the only jetliner in the market. At a constant marginal cost of $20 million per jetliner, Boeing's profit per unit will be the difference between the price and the marginal cost, which is $230 million ($250 million - $20 million). Since Boeing produces the only jetliner in the market, it will sell as many units as the market demands at the given price of $250 million. Therefore, Boeing's total profit will be the profit per unit multiplied by the quantity sold, which is $230 million times the quantity demanded, which is not given in the graph. Hence, the correct answer is C, $230 million.