A foreign firm sells smartphones to a home country. The demand for smartphones in the home country is given by the demand curve: Qd = 100 - 2P. The foreign firm ahs marginal cost of production of MC = 2 + Q and MR = 50 - Q. A) Calculate the equilibrium price and quantity of smartphones sold in the foreign market. Now, assume the home country opens for trade and has vertical import demand (and MR*) at P^x = $30. Assume the foreign firm will price discriminate. B) Calculate the firms overall output. C) Calculate the quantity and price in the foreign market. D) Calculate the quantity and price in the home market.
A foreign firm sells smartphones to a home country. The demand for smartphones in the home country is given by the demand curve: Qd = 100 - 2P. The foreign firm ahs marginal cost of production of MC = 2 + Q and MR = 50 - Q. A) Calculate the equilibrium price and quantity of smartphones sold in the foreign market. Now, assume the home country opens for trade and has vertical import demand (and MR*) at P^x = $30. Assume the foreign firm will price discriminate. B) Calculate the firms overall output. C) Calculate the quantity and price in the foreign market. D) Calculate the quantity and price in the home market.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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