Managerial Econ 2

Managerial Econ 2 - was higher.” He didn’t elaborate In...

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On April 23, 1991, the Air Force awarded a $93 billion (or more) contract to a group lead by Lockheed, Boeing, and General Dynamics to build the new fighter plane for the 21 st century, the YF-22 Lightning 2. A group headed by Northrop and McDonnell Douglas, which had spent more than $1 billion on development for their alternative YF-22, lost out on the contract. That evening on CNN’s Crossfire , the Secretary of Defense explained that the Lockheed group got the contract because their “quality for the price per plane
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Unformatted text preview: was higher.” He didn’t elaborate. In terms of the theory set forth in chapter 5 of our textbook, did he mean: a. The Lockheed quality was higher? b. The Lockheed price was lower? c. If neither, what did he mean? In terms of the economic theory, he means neither higher quality or lower price. Instead, he means that the Marginal Utility Price ratio (MU/P) of Lockheed is higher than the others. This shows that the marginal utility from every dollar spent on Lockheed planes is the highest. Therefore, it is chosen....
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This note was uploaded on 04/14/2010 for the course ECON 2345 taught by Professor Jamison during the Spring '10 term at York University.

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