Question

As car manufacturers incorporate more sophisticated computer technology in their vehicles, auto-repair shops require more computerized testing equipment, which is quite expensive, in order to repair newer cars.1. How is this likely to affect the shape of these firms’ long-run average total cost curves? 2.How is it likely to affect the number of auto-repair firms in any market?

Answer 1

Answer: Your welcome!

Step-by-step explanation:

1. This is likely to increase the long-run average total cost curve for auto-repair shops. The increased amount of computerized testing equipment required to repair newer cars will add to the fixed costs, which will result in an upward-sloping average total cost curve.

2. This is likely to reduce the number of auto-repair firms in any market. The increased cost of investing in the expensive computerized testing equipment means that it will become more difficult for firms to enter the market. This will lead to a decrease in the number of firms in the market due to the higher barriers to entry.