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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

If Boeing produces 9 jets per month, its long-run total cost is $9.0 million per month. If it produces 10 jets per month, its long-run total cost is $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale?

To determine
The economies of scale or diseconomies of scale.

Explanation

If Boeing produces 9 jets per month, and its long run total cost is $9million per month, then the long run average total cost can be calculated as follows:

Long run average total cost=(Long run total costQuantity)=(99)=1

Thus, the long run average total cost is $1 million.

If Boeing increases its production from 9 to 10 jets and the long run total cost is $9

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