Tesla and the Market for Electric Vehicles in the US [16 marks]
Electric-car development seems to be way of the future to help achieve zero-emissions vehicles. Tesla is a market leader among the electric vehicle (EV) manufactures. Read the following articles and then answer the questions below:
https://arstechnica.com/cars/2019/12/tesla-stock-just-hit-a-new-record-of-400-heres-one-reason-why/ https://www.theverge.com/2020/1/29/21113987/tesla-q4-2019-earnings-results-profit-revenue-model-3 https://thenextavenue.com/2020/06/10/teslas-model-3-profit-margin-is-35-and-it-can-double/
Based on the discussion in these articles and economic theory,
a) explain the important role of economies of scale on the production of EVs. [suggestion: 250 words or less] [2 marks for quality of explanation] b) draw an appropriate diagram to illustrate and explain in some detail the profitability of Tesla’s Model 3 sedan over the second half of 2019. [suggestion: 400 words or less] [4 marks for diagram + 5 marks for quality of explanation]
c) Do a bit of extra research and provide a commentary on Tesla’s ability to accelerate EV profitability and gain more market share (and demand) in the foreseeable future. [suggestion: 400 words or less] [5 marks for quality of explanation and research]
Q2. Merchant Ships and Negative External Effects of the Oil Spill in Mauritius [14 marks]
Consider the market for merchant ships. Read the following key article and the relevant weblinks contained within: https://theconversation.com/why-decarbonizing-marine-transportation-might-not-be-smooth-sailing-116949
a) Based on the cited readings (links contained within the key article): construct a table and summarise the key benefits and external environmental costs of merchant ships. [suggestion: 250 words or less] [2 marks for identifying key benefits and external costs]
b) Draw a relevant diagram to illustrate and explain the negative production externality of merchant ships. Label your axes and curves carefully and use hypothetical numbers in your diagram. Assume that the market is competitive. [suggestion: 400 words or less] [3 marks for diagram + 3 marks for quality of explanation]
c) Read the following key articles that talk about the need for sufficient compensation for those parties negatively affected in the Mauritian oil spill:
Assume for simplicity that the main third party affected is the tourism industry in Mauritius. Building on the key diagram you developed in part (b) above, illustrate and critically evaluate the government policy of compensation to help solve the market failure in this case. [suggestion: 400 words or less] [2 marks for diagram + 4 marks for quality of explanation]
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