Domestic auto industry in the long run

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Reference no: EM133031604

Discussion Question - Answer Both Questions in the Scenario

Answer both questions in an essay format, so do not include Letters A. and B. or numbers in your paragraphs.

A. Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?

B. Explain in words why a profit-maximizing firm will not choose to produce at a quantity where marginal cost exceeds marginal revenue

Reference no: EM133031604

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