Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable.Yet Tesla Motors is joining the fray.Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry.Which of the following is Tesla most hoping to benefit from in this market niche?
A) Network effects
B) Economies of scale
C) Customer switching costs
D) Capital requirements

Question

Quizplus · Accepted Answer

Tesla is hoping to benefit from economies of scale in this market niche. Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.

Given the Industry Structure in the Automobile Business, Entering the Auto