When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

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The change in per unit cost from $580 million to $800 million as the order was reduced from 132 to 75 planes suggests that the Defense Department lost economies of scale. As fewer planes were being produced, the fixed costs remained the same, but were spread over fewer units resulting in a higher per unit cost.

When the Defense Department Ordered 132 New Airplanes, the Cost