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.How much profit will Boeing make?

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.How much profit will Boeing make?

Quizplus · Accepted Answer

From the graph, we can see that the demand curve intersects the marginal cost curve at a quantity of 10 jetliners. At this quantity, the price is approximately $25 million per jetliner. Thus, Boeing's total revenue will be $250 million (10 jetliners * $25 million per jetliner). Total cost will be $200 million (10 jetliners * $20 million per jetliner). Therefore, total profit will be $50 million ($250 million - $200 million), and option C is the closest to this value.