Suppose that demand for railroad travel is low (and expected to stay low for many years) so that companies that invested in buying passenger railroad cars cannot pay the interest on their debt but they can cover the cost of operating the railroads. What do you expect to happen in this industry in the next few years? If the railroads go bankrupt, will they stop carrying passengers? What will happen over time as railroad cars break down?

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The Railroad Industry with Low Demand Given the scenario of sustained low demand for passenger rail travel a few potential consequences can unfold in ... View the full answer