Free trade import level and level of domestic production

Assignment Help Business Economics

Reference no: EM131387160

This problem asks you to consider the effects of market share targets. Assume that there is domestic competitive supply in Japan. The Japanese supply curve is given by S(P) = P: The foreign supplier (from the U.S.) has market power over residual demand. He has same marginal costs as the Japanese firms supply function. Total demand in Japan is given by: P=10-Q You do not need to calculate numbers, you may draw a diagram to scale, or calculate, or both and give intuition.

a. What is the free trade import level and level of domestic production?

b. What is the market share of the foreign firm? Why is it less than that of the Japanese firms despite having the same marginal costs as they do collectively?

c. Suppose that the Japanese government promises the U.S. firm this market share. Derive the residual demand curve facing the U.S. firm.

d. What do you predict the U.S. firm will charge now? What will prices be? What is the e⁄ect on Japanese welfare?

e. Would such a policy be desired by non Japanese producers with market power? Why?

Reference no: EM131387160

Questions Cloud

Consider price-taking firm with production function : Consider a price-taking firm with production function y=4·x^(1/2). And the input price of x is $8 per unit. The market inverse demand is p=90-y. Write down the firm’s cost function. Derive the firm’s supply function. Find the market equilibrium, such..

What mistakes did the federalists make : What developments of the 1790s resulted in the rise of the Republican Party? What mistakes did the Federalists make? What evidence reveals that sectional differences regarding the economy and allocation of political power were growing in the period o..

Price level of a negative demand shock : Use the AD-AS graph to explain the short run and long run effects on real GDP and price level of a negative demand shock, such as a decrease in autonomous consumption. how the economy reacts to the shock and what happens in the long run to GDP and Pr..

Find the equilibrium price of permits : There are a large number of chicken farms of varying sizes on the Delmarva peninsula and together they produce huge quantities of fecal waste. Suppose that a system of tradeable permits is created in which each permit authorizes one ton of waste runo..

Free trade import level and level of domestic production : This problem asks you to consider the effects of market share targets. Assume that there is domestic competitive supply in Japan. The Japanese supply curve is given by S(P) = P: The foreign supplier (from the U.S.) has market power over residual dema..

Consider again the great depression : Consider the forces that led to the Great Depression. In the very short run, the effect of these forces would be _________ in the price level and _________ in real output. Consider again the Great Depression. The long run effect of the forces cited a..

The economy experienced stagflation : In the 1970s, the economy experienced stagflation - a situation where prices rise but output falls. In the short run, then, stagflation must be caused by. In the long run, the shift described in the last question would cause ________ in the price lev..

Devised new hybrid enerty system : If your stock broker tells you that you should buy stock in Ford as it has devised a new hybrid enerty system that will reduce consumption of fuel by 90%, would you follow this advice and buy Ford's stock?

Identify an example of recent price adjustment : Identify an example of a recent price adjustment. This can be a new sale price, a price increase or a special offer. What was the influence of competitors before the price adjustment? What are the actions taken by competitors after the price adjustme..

User Account

All Pages