+1-415-670-9189
info@expertsmind.com
Prot of the domestic rm and the prot of one foreign rm
Course:- Business Economics
Reference No.:- EM13891965




Assignment Help
Assignment Help >> Business Economics

1. Consider a country, called Home, with one domestic rm competing with n foreign rms.

All the rms sell a homogeneous product and the demand in Home is p = a - bY where Y = yd +nyf .The domestic cost of producing one unit is c and the foreign cost of producing one unit is cf . The foreign rm must also incur an international cost equal to t per unit in order to sell in Home.

(i) Write the prot functions for one domestic and for one foreign rm.

(ii) If all these rms compete in quantity (Cournot competition), derive the equilibrium quantity produced by the domestic rm, the quantity produced by each foreign rm, the equilibrium price, the prot of the domestic rm and the prot of one foreign rm.

(iii) What is the impact of an increase in the number of foreign rms on the quantity sold per rm? Is there a dierence between the domestic and a foreign rm? Does the total quantity sold by foreign rm rise or fall? Explain.

(iv) Suppose now that t changes, what is the impact on the quantity sold per rm and on the prot per rm? Is there a dierence between domestic and a foreign rm? Explain.

(v) Suppose domestic welfare is dened as W = CS + d, where CS is the consumer surplus and d is the domestic rm prot. What is the impact of an increase in t on the consumer surplus? Given your answer to (iv), what do you then expect the impact of an increase in t on domestic welfare? Explain.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Assume a good where its equilibrium price is 40 and its equilibrium quantity is 3.0 units. Compute the supply surplus when price is 60. Take into consideration that the elasti
The Sarbanes-Oxley Act provides for the establishment of the _____________ to over see audits of public companies. This will be done to protect the interests of shareholders a
The company has taken the approach to use the standard out-of-the-box solution and has decided to not customize it. As a part of the implementation they decide to go with Or
Assuming that the cost of capital is $1,000 and labour costs $10.00 per hour, determine the total variable cost, average variable cost and the marginal cost of the firm for
Suppose that in England 5 man-hours are required to produce each cask of wine and 5 man-hours are required to produce each bolt of cloth, whereas in Portugal 1 man-hour is req
What are the characteristics of perfect competition? Why does this type of fast-food restaurant tend to display characteristics of perfect competition? Imagine you are running
An economist, has the following information about Lais Island, a closed economy, for the year 1820: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The economist also estimates that
According to the New York Times (11/18/06) the number of car producers in China is increasing rapidly. The newspaper reports that “China has more car brands now than the Unite