Final answer:
The contribution of an economy car or a luxury car to GDP depends on various factors, including the specific economic conditions and international trade, which affect economies of scale and competition.
Step-by-step explanation:
The question of whether the production of an economy car or a luxury car contributes more to GDP is multifaceted. While an economy car caters to a larger market segment, potentially leading to higher volume sales, a luxury car generates higher profit margins due to the premium charged for luxury features and brand value. Therefore, the answer is d) It depends on the specific economic conditions, and both could have significant contributions. This is due to dynamic comparative advantage and competitive pressures from various global manufacturers.
In fact, the concept of economies of scale plays a significant role here. In a country depending on a few large-scale producers for all its automobiles, without international trade, consumer choice is limited, and there's little competition. However, when international trade is involved, it enables large producers to supply cars worldwide at lower average production costs, which in turn impacts GDP with a wider variety of options and increased competition, resulting in innovation and improved quality of automobiles.
Moreover, with international trade, competition is heightened, as domestic producers like General Motors, Ford, and Chrysler in the U.S. have to compete with international brands such as Toyota, Honda, and BMW. This competition leads to better products and potentially higher GDP contributions through improved economics and trade dynamics. Therefore, the contribution to GDP is not solely based on the type of car but also on the broader economic conditions and international trade implications.