(8 marks) Suppose that cars are an external economies of scale good. Imagine that the US...

Suppose that cars are an external economies of scale good. Imagine that the US has an initial (head start) advantage in car production. Mexico has not produced any cars, but is considering entering the car industry. Despite the US’s initial advantage in car production, Mexico is able to enter car production and eventually becomes the world’s only producer of cars. Draw a diagram with a forward falling supply curve for each country (and any other curves you may need) that illustrates this scenario, and briefly explain using words.

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Rahul Sunny answered 1 month ago

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