5. Choice between direct exporting and FDI Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in Russia. ? 20 18 16 14 AC I I I 0 80 90 100 10 20 30 40 50 60 70 QUANTITY (Thousands of puzzles) uppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000 uzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.) per puzzle, produce 10,000 puzzles at ased on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $ S per puzzle, and produce the total of 30,000 puzzles at $ per puzzle. omplete the following table by indicating Das Spielzeug's total production cost for each scenario. Total Production Cost (Dollars) Scenario Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles at the same factory. ow suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $4.00 per ansported puzzle. Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is S Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is S Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best production strategy? O Produce 30,000 puzzles in either Germany or Russia. O Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia. O Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany. O Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. COST (Dollars per puzzle) 6 4 2 0
5. Choice between direct exporting and FDI Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in Russia. ? 20 18 16 14 AC I I I 0 80 90 100 10 20 30 40 50 60 70 QUANTITY (Thousands of puzzles) uppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000 uzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.) per puzzle, produce 10,000 puzzles at ased on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $ S per puzzle, and produce the total of 30,000 puzzles at $ per puzzle. omplete the following table by indicating Das Spielzeug's total production cost for each scenario. Total Production Cost (Dollars) Scenario Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles at the same factory. ow suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $4.00 per ansported puzzle. Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is S Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is S Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best production strategy? O Produce 30,000 puzzles in either Germany or Russia. O Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia. O Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany. O Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. COST (Dollars per puzzle) 6 4 2 0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:5. Choice between direct exporting and FDI
Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The
average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in
Russia.
?
20
18
16
14
12
10
AC
0 10
80
90 100
20 30 40 50 60 70
QUANTITY (Thousands of puzzles)
Suppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000
puzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.)
per puzzle, produce 10,000 puzzles at
Based on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $
per puzzle, and produce the total of 30,000 puzzles at $
per puzzle.
Complete the following table by indicating Das Spielzeug's total production cost for each scenario.
Total Production Cost
(Dollars)
Scenario
Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia.
Produce 30,000 puzzles at the same factory.
Now suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $4.00 per
transported puzzle.
If Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is
$
If Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is
Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best
production strategy?
Produce 30,000 puzzles in either Germany or Russia.
Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia.
Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany.
Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia.
COST (Dollars per puzzle)
4
2
0
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