Exporting vs FDI: The Proximity-Concentration Trade-Off.Your firm wants to sell its product in each of several foreign countries, and you must decidewhether to do so by exporting or by producing locally for that market through FDI. Supposethat in each country the demand for the product is the same, and is given by:P = 15 - Q,where P is the price your firm charges in that country in dollars and Q is the quantity soldthere. In addition, the marginal cost of production in any country is the same, and is equal to$4 per unit. Wherever you choose to produce, your firm is a monopolist. To produce in aforeign country, your firm must incur a fixed cost equal to $21. On the other hand, to producehere and export to a country that is d miles away requires a transport cost of (d/1000)|dollars per unit shipped.a. If you export to a given country located at a distance d, what would the quantity sold, theprice charged and the profits be? (all as a function of distance)b. If you sell in a given country by setting up a subsidiary, what would the quantity sold, theprice charged and the profits be?c. For what values of d will your profit-maximizing decision be the export option? The FDIoption?

Part a: Export Option (as a function of distance, d) The firm exports to a country located at a…

Answered: Exporting vs FDI: The…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.8P

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Potato SA's head of marketing Willie Jacobs has explained that the practice of potato dumping holds some harmful consequences. These include further economic decline and hitting where it hurts most, the livelihoods of South African farmers and workers and their families. He added that irregular imports are detrimental to a viable local economy; hence the implementation of consistent anti-dumping measures is essential." If demand theory is used to explain why South African farmers feel their businesses are under threat, it is because they believe that... A. They would have to sell their produce at a low price resulting in losses. B. They are expecting prices to rise in the future. C. There is not enough demand for potatoes in the market. D. The dumped potatoes shift the supply curve outwards resulting in price that is too high for consumers to afford.
To produce a car, you need steel as an intermediate good. If this country imports both cars and steel, a 25% tariff rate can be imposed on car imports, and a 10% tariff rate can be imposed on steel imports. The price of a car is $200 before the tariff, and the price of one unit of steel is $25. Knowing that two units of steel are required to produce one car: The effective rate of protection if only the tariff on steel is imposed=-0.033. The effective rate of protection if only the tariff on steel is imposed=0.3. The effective rate of protection if only the tariff on steel is imposed=0.333. The effective rate of protection if only the tariff on steel is imposed=D0.25.
If the United States is currently importing 14 million barrels per day at a world price of $4.00 per unit (the entire amount consumed), what is the effect on imports of a tax equal to $8.00 per unit? Quantity of Barrels Supplied (Millions) Quantity of Barrels Demanded (Millions) 0 2 4 6 8 10 12 The amount of imports after the $8.00 per-unit tax is responses as a whole number.) ges Price per Barrel Get more help. $4 8 Using the table above, after the imposition of the $8.00 per-unit tax, the new quantity supplied is 4 million barrels and the new quantity demanded is 12 million barrels. (Enter your responses as a whole number.) 12 16 20 24 28 14 13 12 11 10 9 8 million barrels per day. Before the tax, domestic producers supplied 0 barrels of crude oil. They now supply million barrels Clear all (Enter your more less Check answer (e)
If the government of brazil allows free trade and the world price is $10, then
Korea’s demand for computers isQK = 2, 000 − PkIts supply isQK = −200 + PkChina’s demand for computers isQC = 1, 000 − Pc Its supply isQC = Pc1. Suppose that Korea imposes a specific tariff of $100 on computerimports. Calculate the price of computers in each country and thequantity of computers supplied and demanded in each country. Alsocalculate the volume of trade.
NAFTA is a trade agreement between North American countries. O True O False
In 1932, U.S. manufacturers, which used to enjoy steady relationships with their foreign distributors and export nearly 60% of their output, realized that their exports had fallen to only 20% of total output. Which of the following is the most likely reason for this decrease in exports? O The low quality of U.S. products O war between the United States and Canada O Retaliatory tariffs by trading partners The signing of the General Agreement on Tariffs and Trade (GATT) in 1947 resulted in the adoption of several new trade policies. In the following table, indicate if each of the policies listed was a result of GATT. Then, complete the last column by identifying the means by which each GATT policy was implemented. Policy GATT Policy Implementation Promotion of protectionism Clear and public trade rules Promotion of lower trade barriers Yes v Institution of the WTO Promotion of trade transparency Settling trade disputes In the 1960s, multilateral negotiations called the Uruguay Round…
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Which of the following arguments might be legitimate reasons for limiting imports? a) Imports destroy jobs in the import-copeting industry so we should protect this industry to save jobs. b) We need to impose tariffs fo stop our industries moving their operations and jobs to lob wage countries c) if the cost of shifting resources from import-competing industries are high enough so that together with the other transaction costs they exceed the gains from trade, we should slow down the imports. d) Low income countries' ability to buy our goods is so much less that our ability to buy theirs, that in order to have balanced trade, we should impose some restrictions of imports from such low income countries. e) Some countries f) Some foreign producers sell below their costs in order to monopolize the market so they can raise prices to monopoly levels and fleece our cosumers, so we should impose restrictions specific to such…
Homework (Ch 09) Q Search th The following graph shows the domestic supply of and demand for maize in Panama. The world price (Pw) of maize is $270 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount dermanded by any one country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Domestic Demand Domestic Supply 450 430 410 300 370 350 330 260 270 PRICE (Dollars per ton)

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