Economics Case

1. Average total cost of the Volt for GM is $89,000. Marginal Cost was stated as $20,000-$32,000 per vehicle. The discrepancy between the two numbers has to do with the many factors that go into producing a single vehicle.

2. The estimates that GM is losing $49,000 on each Volt it builds comes from subtracting how much the cars are being sold for ($39,000) from the total production cost ($89,000).

3. GM should not discontinue its production of the Volt. Production costs per vehicle are already steadily decreasing, and the car already seems to have a high enough value to justify charging more. The higher level of features and unique parts are what differentiates it from other hybrid cars. Furthermore, the government offers a rebate to consumers, giving them another incentive to buy a hybrid car. 1. Average total cost of the Volt for GM is $89,000. Marginal Cost was stated as $20,000-$32,000 per vehicle. The discrepancy between the two numbers has to do with the many factors that go into producing a single vehicle. The former number includes research funds that went into producing such an innovative and technologically complex model and other factors that went into the initial aspects of planning for the Volt model. The marginal cost, however, is the cost of producing one additional unit after all of these other factors have been established.

2. The estimates that GM is losing $49,000 on each Volt it builds comes from subtracting how much the cars are being sold for ($39,000) from the total production cost ($89,000). However, as we just determined, that value (89) should be much less the more Volts are being manufactured. Thus, as time goes on, less money should be lost per vehicle and a profit should begin to be made.

3. GM should not discontinue its production of the Volt. Production costs per vehicle are already steadily decreasing, and the car already seems to have a high enough value to justify