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How many airplanes will Boeing produce? How do you know? 6) How much will they charge for their planes? 7) What will be their: Total revenue? Total costs? Profit? Price (million $) 60 Quantity Total Marginal revenue Revenue 1 50 2 40 3 3 30 4 20 5 6 10 Quantity Margintai Average Marginal Total Cost Cost 45 20 1 2 2 37 12 3 32 20 4 30 30 5 37 60
How many airplanes will Boeing produce? How do you know? 6) How much will they charge for their planes? 7) What will be their: Total revenue? Total costs? Profit?
Price (million $) 60 Quantity Total Marginal revenue Revenue 1 50 2 40 3 3 30 4 20 5 6 10 Quantity Margintai Average Marginal Total Cost Cost 45 20 1 2 2 37 12 3 32 20 4 30 30 5 37 60
Expert Solution
Boeing will produce 3 airplanes. This is the case as it will produce at a point where the marginal revenue = marginal cost as it is the profit maximizing condition
At 3 units of airplanes,
MR = 40*3 - 50*2 = 120-100 = 20
MC = 20
Thu, MR = MC
Q6) From the table, the price corresponding to 3 airplanes is $40 million
Q7) Total revenue = PQ = 40*3 = $120 million
Total cost = ATC*Q = 32*3 = $96 million
Total profit = Total revenue = - Total cost = 120 - 96 = $24 million
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