Imagine you are an analyst for a major car manufacturer. You need to write an email that discusses whether or not the company should attempt to expand its car line into a new space — sporty cars aimed at the active lifestyle consumer.
Currently there are 2 other major car manufacturers making this type of car. You think that your company can develop, design and produce the car for an average cost of $25,000 per car. Right now in the market, the average price of this type of car is $35,000.
Given what we have learned about market structure, write a brief note discussing whether or not the company should enter the sporty car segment of the market.
In your answer, be sure to make any assumptions explicit and consider the market structure of the car industry as well as the potential response of competitors. Feel free to draw any diagrams of models you feel will help explain your ideas, but be sure to explain all economic concepts clearly.
