Cost curves-the subject of this chapter-are critical tools for analyzing a company’s cost structure. Is the story of United Streetcar an example of a misguided effort to steer business domestically? Would it have succeeded if the market for streetcars in the United States had not dried up? To answer these questions, we need to think about the cost structure of the industry and whether there are aspects of it that would support the decision to start manufacturing streetcars domestically. In 2014, United Streetcar ceased production and laid off its workers.

In addition, the expected boom in streetcars slowed considerably with the recession of 2008 and changing municipal priorities. In the end, the firm faced severe delays and cost overruns and eventually got very behind on its scheduled delivery. Other US cities that were introducing streetcars, such as Washington, DC, and Tucson, Arizona, contracted with Oregon Iron Works for their cars as well. Oregon Iron Works had no experience in manufacturing streetcars but created a subsidiary firm to do so called United Streetcar. Portland, Oregon, is one city that revived the streetcar and subsequently expanded its system.Īfter initially buying streetcars from the German company Siemens, Portland’s transit authority and government, pushed by the federal government, which funds a large portion of urban transit projects, decided to contract with a local firm, Oregon Iron Works, to produce the streetcars locally. Once common in the United States and still common in many European cities, streetcars all but disappeared from US streets in the second half of the twentieth century. Streetcars are electric-powered public vehicles that ride on rails embedded into normal city streets and comingle with traffic. In recent years, streetcars have enjoyed a bit of a renaissance in the United States. Should the Federal Government Promote the Domestic Production of Streetcars?

Long run vs short run graph