Vulnerability of Firms
This case study introduces two types of vulnerability of firms. Condier a firm or industry of the airline industry, and analyse if you expect would have a high type 1 vulnerability.(i)What does type 1 cost vulnerability indicate about the relationship between production and average cost in the industry?(ii)What would the typical firms average cost (AC) curve look like, if it has type 1 vulnerability? Show through a graph. What would be a major cause of this cost structure? Do you think that the airline industry provides a suitable example of type 1 cost vulnerability? Justify your reason.(iii)How did the airline industry (or an airline firm you have selected) perform during the global pandemic of year 2020? Did this match your expectations? Support your answer with evidence.
