Question

Two car manufacturers, Saab and Volvo, have fixed costs of $1 billion and marginal costs of $10,000 per car. If Saab produces 200,000 cars per year and Volvo produces 100,000 cars per year, calculate the average production cost for each company. Average production cost for Saab: $ . Average production cost for Volvo: $ . On the basis of these costs, which company's market share do you think will grow in relative terms?

Answer 1

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