Figure 6.5 Japanese Market for Jetliners
-Consider the Japanese market for jetliners as depicted in Figure 6.5.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner but now a European manufacturer,Airbus,begins production.Airbus faces the same marginal cost as Boeing but the European government provides Airbus with a subsidy of $8 million per jetliner produced.As a result of the competition,Boeing leaves the Japanese market leaving Airbus as a monopoly.How many jetlines will airbus produce and what price will they sell them for?
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