Firms in the home appliances sector in Home country are known to follow monopolistic competition. In autarky, each firm faces the following demand for its product: p = 80-3q. where p is the price of a firm's product and q is its output. Consider three home appliance producers in Home, A, B, C, and D, which have the following constant marginal cost of production, cд = 8, cB = 20, cc = 38, and cp = 50. a) Calculate the sales and price for each firm in autarky by completing the following table. Enter the number values only in the answer boxes. Firm A FA=8 Firm B Firm C Firm D CB=20 c=38 CD=50 JA 24 QB- 20 14 ID=5 PA= 8 PB = PC= 38 PD=65 Home is open to trade with an economy of similar market size, Foreign. Each firm in the sector now faces a demand p = 60-2q" from the domestic market and pEX=60-2qBX from the foreign market. To export to Foreign market, a firm must incur a fixed cost FEX rafi profit pq-cq for domestic market, and profit EX=pEX EX-cqEX-FEX for export market. $100 to advertise and set up new distribution channels for its products. There is no fixed cost involved with serving the domestic market only. The profit in each market for a firm is therefore: b) which firms survive in the domestic market when Home is open to trade? All the four firms c) A firm will export to Foreign if it earns positive or at least zero export profit. Which firms will export to Foreign? Firm A and firm B only d) What is the export profit of the most productive exporter in part (c)? See the Question 22 for parts (e) and (f) of this question.
Firms in the home appliances sector in Home country are known to follow monopolistic competition. In autarky, each firm faces the following demand for its product: p = 80-3q. where p is the price of a firm's product and q is its output. Consider three home appliance producers in Home, A, B, C, and D, which have the following constant marginal cost of production, cд = 8, cB = 20, cc = 38, and cp = 50. a) Calculate the sales and price for each firm in autarky by completing the following table. Enter the number values only in the answer boxes. Firm A FA=8 Firm B Firm C Firm D CB=20 c=38 CD=50 JA 24 QB- 20 14 ID=5 PA= 8 PB = PC= 38 PD=65 Home is open to trade with an economy of similar market size, Foreign. Each firm in the sector now faces a demand p = 60-2q" from the domestic market and pEX=60-2qBX from the foreign market. To export to Foreign market, a firm must incur a fixed cost FEX rafi profit pq-cq for domestic market, and profit EX=pEX EX-cqEX-FEX for export market. $100 to advertise and set up new distribution channels for its products. There is no fixed cost involved with serving the domestic market only. The profit in each market for a firm is therefore: b) which firms survive in the domestic market when Home is open to trade? All the four firms c) A firm will export to Foreign if it earns positive or at least zero export profit. Which firms will export to Foreign? Firm A and firm B only d) What is the export profit of the most productive exporter in part (c)? See the Question 22 for parts (e) and (f) of this question.
Chapter9: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 5SQ
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Transcribed Image Text:Firms in the home appliances sector in Home country are known to follow monopolistic competition. In autarky, each firm faces the following demand for its product:
p = 80-3q.
where p is the price of a firm's product and q is its output.
Consider three home appliance producers in Home, A, B, C, and D, which have the following constant marginal cost of production, cд = 8, cB = 20, cc = 38, and cp = 50.
a) Calculate the sales and price for each firm in autarky by completing the following table. Enter the number values only in the answer boxes.
Firm A
FA=8
Firm B
Firm C
Firm D
CB=20
c=38
CD=50
JA
24
QB-
20
14
ID=5
PA=
8
PB =
PC=
38
PD=65
Home is open to trade with an economy of similar market size, Foreign. Each firm in the sector now faces a demand
p = 60-2q" from the domestic market and pEX=60-2qBX from the foreign market.
To export to Foreign market, a firm must incur a fixed cost FEX
rafi
profit pq-cq for domestic market, and
profit EX=pEX EX-cqEX-FEX for export market.
$100 to advertise and set up new distribution channels for its products. There is no fixed cost involved with serving the domestic market only. The profit in each market for a firm is therefore:
b) which firms survive in the domestic market when Home is open to trade? All the four firms
c) A firm will export to Foreign if it earns positive or at least zero export profit. Which firms will export to Foreign? Firm A and firm B only
d) What is the export profit of the most productive exporter in part (c)?
See the Question 22 for parts (e) and (f) of this question.
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