Boeing aircraft company was able to cover its production costs of the first ―jumbo jet‖ in the seventies because Boeing could market it to several foreign airlines in addition to domestic airlines. This illustrates:

 Options:

a. How economies of scale make possible a larger variety of products in international trade. b. A transfer of wealth from domestic consumers to domestic producers as the result of trade c. How a natural monopoly is forced to behave more competitively with international trade. d. How a natural monopoly is forced to behave less competitively with international trade.

The Correct Answer Is:

a. How economies of scale make possible a larger variety of products in international trade.

Correct Answer Explanation: a. How economies of scale make possible a larger variety of products in international trade.

Boeing’s success with the introduction of the first “jumbo jet” in the seventies offers a fascinating insight into the dynamics of international trade and the influence of economies of scale. The correct option, a, highlights how economies of scale facilitate the production of a broader range of products for international trade.

Economies of scale refer to the cost advantages that businesses achieve due to an increase in production. When Boeing launched the “jumbo jet,” it leveraged economies of scale by producing a larger aircraft that could accommodate more passengers than previous models.

The key factor here was the ability to spread the fixed costs of development and production over a larger number of units.

Boeing’s success was not solely reliant on the domestic market. By catering to several foreign airlines in addition to domestic ones, Boeing expanded its customer base. This move allowed them to distribute their fixed costs over a larger number of units sold globally, making it more economically viable to cover the high initial production costs.

Now, let’s delve into why the other options b, c, and d are not the correct answers:

b. A transfer of wealth from domestic consumers to domestic producers as the result of trade:

This answer doesn’t accurately represent the situation with Boeing’s “jumbo jet.” The success wasn’t solely due to wealth transfer from domestic consumers to producers.

While Boeing did benefit from selling their aircraft to various airlines, the primary factor was leveraging economies of scale in international markets to spread fixed costs and improve cost-effectiveness.

c. How a natural monopoly is forced to behave more competitively with international trade:

The concept of a natural monopoly doesn’t directly apply to Boeing’s situation. Boeing was a dominant player in the aircraft manufacturing industry, but its success with the “jumbo jet” was more about capitalizing on economies of scale rather than responding to increased competition through international trade.

The nature of the market dominance didn’t change significantly due to international trade.

d. How a natural monopoly is forced to behave less competitively with international trade:

Again, the idea of a natural monopoly behaving less competitively due to international trade doesn’t align with Boeing’s case.

Boeing’s behavior wasn’t influenced by decreased competition but rather by the opportunity to reach a larger market through international trade, allowing them to achieve economies of scale.

Boeing’s success with the “jumbo jet” primarily exemplifies how economies of scale enabled the production of a larger, more efficient aircraft, which could be marketed globally to multiple airlines.

This approach allowed Boeing to effectively cover its high production costs and pave the way for further innovations in the aviation industry.

In summary, Boeing’s ability to market the “jumbo jet” to both domestic and foreign airlines underscores how economies of scale play a pivotal role in enabling a wider variety of products for international trade. This strategy helped Boeing spread its fixed costs and achieve economic viability, showcasing the significance of scale in global markets.

Related Posts

• If I purchase a stereo from South Korea, I obtain the stereo and South Korea obtains the dollars. But if I purchase a stereo produced in the United States I obtain the stereo and the dollars remain in America. This line of reasoning is:
• If a tariff and import quota lead to equivalent increases in the domestic price of steel then: