Related to the Economics in Practice on page 204: The auto industry exhibits large economies of scale due in part to the large capital investment of the assembly lines. During the recession of 2008-2009, the auto industry ________, and the per-unit costs of producing cars ________.
A) had excess capacity; increased
B) was producing above capacity; increased
C) had excess capacity; decreased
D) was producing at capacity; decreased

Question

Quizplus · Accepted Answer

During the recession of 2008-2009, the auto industry had excess capacity because demand for cars fell sharply. As a result, the per-unit costs of producing cars increased due to the fixed costs being spread over a smaller number of units.

Related to the Economics in Practice on Page 204: the Auto