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 consumer surplus will the Japanese airlines who purchase the jetliners earn from their transactions with Boeing?

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 consumer surplus will the Japanese airlines who purchase the jetliners earn from their transactions with Boeing?

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. In this case, the Japanese airlines are willing to pay up to $50 million per jetliner, but they are only paying $35 million per jetliner. Therefore, the consumer surplus is $15 million per jetliner. Since the Japanese airlines purchase 15 jetliners, the total consumer surplus is $15 million x 15 = $230 million.