Question

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? Provide reasons.

Answer 1

Answer:

economies of scale

Step-by-step explanation:

The computation is shown below

In the first case

Long run average cost is

= $9 million ÷ 9 jets

= $1 million

In the second case

Long run average cost is

= $9.5 million ÷ 10 jets

= $.95 million

As it can be seen that the long run average cost would be decreased when the number of jets is increased this represent the economies of scale