Answer to Question #18809 in Economics of Enterprise for Michelle

Question

Suppose that Chinese manufacturers develop the ability to build a good car that costs only $5,000. They start shipping it to the U.S. For each of the following groups, say whether they are likely to win, lose or not be affected much by the Chinese imported cars.
a. Low-income American families
b. High-income American families
c. U.S. autoworkers
d. U.S. auto companies

Answer 1

a. Low-income American families are likely to win, because they will have possibility to buy these cheap cars.
b. High-income American families will not be affected, because they buy more expensive cars.
c. U.S. autoworkers are likely to lose, because they can lose their jobs in this case.
d. U.S. auto companies are likely to lose, because the demand for their comparatively expensive cars will decrease and they may shut down.