Answer to Question #210518 in Economics for Pheto

Question #210518

What is the effect on the market when suppliers under invest in their businesses?


1
Expert's answer
2021-06-28T02:36:08-0400

The underinvestment problem describes a conundrum whereby a company becomes so overleveraged that it can no longer make investments in growth opportunities.

When suppliers underinvest in their businesses, they put the supply quantities at risk, and there is no possibilities for increase in supply in this market.


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