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What will be the minimum price that slovakia would expect

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Cars account for nearly 20 per cent of total exports made by Slovakia. In the domestic market, equilibrium price of a specific model of cars is equal to Euro 10,000. One of the major export destinations for the Slovak cars is Germany, where a similar car manufactured by a German firm sells for Euro 16,000. It is observed that the transportation cost of such a car from Slovakia to Germany is Euro 2000.

a. What will be the minimum price that Slovakia would expect to earn from Germany on one unit of car?

b. What should be the import price of cars in Germany so that German consumers do no lose anything by buying a car imported from Slovakia?

c. If the international price for this car is Euro 13000, what will be the gain for the exporters of cars in Slovakia and consumers buying imported cars in Germany? 

Reference no: EM132489398

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