Automobile Industry Case

1702 Words7 Pages

Assignment-1
Answer 1.
(a)
Pollution has become one of the major problems any state in India is facing. As a result of increasing pollution the air quality is decreasing at an exponential rate leading to various health related issues.

Without government intervention, why would car manufactures which are privately run firms work on reducing pollution their main agenda is profit making. Furthermore, the private car owners have little incentive to curb their travel habits. As there is no direct cost related to causing pollution. The growing urbanization and globalization has increased people’s capacity to buy and use cars tremendously. Cars have become a status symbol more than the mode of convenience for them. Plus the lack of public …show more content…

So if the product is elastic the marginal revenue is positive and if the product is inelastic the marginal revenue is negative.

In our case the product is elastic, so ideally the marginal revenue should be positive. The numerical result matches our expectations.

So for every additional unit of product X produced the revenue increases by $65.

Answer 3.
Economies of scale can help you reduce your fixed cost and increase your reach to potential customers. So when the quantity of the product being manufactured increases it reduces the average cost. Furthermore it leads to specialization of labor and better capital utilization. This will help you to stay profitable (as you have better margins) and expand with ease. Additionally, it also gives you bargaining power. You will be able to bargain or negotiate with your suppliers to sell you at a lower price so that you can pass on the same benefit to your customers. So If your firm employs economies of scale It will have a competitive advantage over other firms as you will be able to deliver products at a lower

More about Automobile Industry Case

Open Document