The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car. Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?
A) Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees' wages.
B) Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost.
C) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.
D) Despite an expensive advertising campaign the Model A did not earn the company a profit.
Question 2
The only firms that do not have market power are
A) firms in perfectly competitive markets. B) firms in industries with low barriers to entry.
C) firms that do not advertise their products. D) firms that sell identical products.
