Losing share long term could mean shutting down factories

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The following quotation appeared in a Wall Street Journal article on the battle for market share in the automobile industry in 2000: “The huge fixed costs involved in developing new vehicles and running big auto factories means auto makers feel compelled to maintain-or expand-market share. Losing share long term could mean shutting down factories, or running factories at unprofitable rates.” Do these statements support economic theory and show that economies of scale do not benefit a firm if the output level is small? Please explain.

Reference no: EM131159494

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