diminishing marginal product explains why, as a firm’s output increases,

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Asked: 2023-11-04T17:16:19+05:30 In: Other
diminishing marginal product explains why, as a firm’s output increases,

Hi, I have a question and I hope anyone could answer it:

Diminishing marginal product explains why, as a firm’s output increases,

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 dis-economies of scale?

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    2. Answer: The production function gets flatter, while the total-cost curve gets steeper.

      The long-run average total cost of producing 9 planes is $9 million / 9 = $1 million. The long-run
      average total cost of producing 10 planes is $9.5 million / 10 = $0.95 million. Since the long-run
      average total cost declines as the number of planes increases, Boeing exhibits economies of
      scale.

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