In Problem 15, under what conditions would GM stop producing the ...

[wenmo]

In Problem 15, under what conditions would GM stop producing the Chevy Volt and exit the market for electric cars. Explain your answer.
 
  What will be an ideal response?

Question 2

Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What area represents the deadweight loss after the imposition of the price floor?
 
  A) J + H B) C + E + J + H C) C + E D) G + H

[jharrington11]

Answer to Question 1

GM will permanently shut down and exit the market in the long run if the price of a Volt is less than GM's average total cost. In this situation, if it remained open GM would incur an economic loss but if it exited the market it would no longer incur an economic loss.

Answer to Question 2

C