Consider the following information: Suppose fixed costs for a firm

 

Consider the following information:

Suppose fixed costs for a firm in the automobile industry (start-up costs of factories, capital equipment, and so on) are $5 billion and that variable costs are equal to $17,000 per finished automobile. 

Because of competitive forces in the market, the market price falls as more firms enter the automobile market, or specifically, P=17,000+(150/n), where n represents the number of firms in a market.

Assume that the initial size of the U.S. and the European automobile markets are 300 million and 533 million people, respectively.

Now answer the following questions:

  • Calculate the equilibrium number of firms in the U.S. and European automobile markets without trade. 
  • What is the equilibrium price of automobiles in the United States and Europe if the automobile industry is closed to foreign trade?

Now suppose the United States decides on free trade in automobiles with Europe. The trade agreement with the Europeans adds 533 million consumers to the automobile market, in addition to the 300 million in the United States.

  •  How many automobile firms will there be in the United States and Europe combined? 
  • What will be the new equilibrium price of automobiles? 
  • Why are prices in the United States different ? 
  • Are consumers better off with free trade? In what ways?

Share This Post

Email
WhatsApp
Facebook
Twitter
LinkedIn
Pinterest
Reddit

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

Rubric for Assignment-3 Logical Data ModelInstructions:Draw a logical data model (ERD) for the Picnics R US case [Refer to ‘Assignment#1’

Rubric for Assignment-3 Logical Data ModelInstructions:Draw a logical data model (ERD) for the Picnics R US case [Refer to ‘Assignment#1’ and‘Assiignment#2’ on Canvas under ‘Assignments’]Rubric: 30% – Identify the entities 15% – Add appropriate attributes for each entity 15% – Assign identifies for each entity 15% – Draw the relationships

Part II: Given the arguments shared in the article titled, “Is Organizational Behavior Overtheorized?” along with what you have read in this unit’s

Part II: Given the arguments shared in the article titled, “Is Organizational Behavior Overtheorized?” along with what you have read in this unit’s assigned readings, how would you address the question? Would you agree or disagree? Why? Part III: The textbook states that at the organizational level, productivity is based upon effectiveness and efficiency.

Research Proposal Draft By the due date assigned, write a 2 page paper addressing the sections below of the research proposal. Methodology Extraneous

Research Proposal Draft By the due date assigned, write a 2 page paper addressing the sections below of the research proposal. Methodology Extraneous Variables (and plan for how controlled). Instruments: Description, validity, and reliability estimates, which have been performed (on a pre-established measure). Include plans for testing validity and reliability