4. Strategic trade policySuppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEurope in the European Union. The followinghypothetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makesaircraft, it receives a profit of $60 million. If both companies decide to produce, they each lose $4 million. When a company decides not to produce, itearns zero profit.AirEuropeProduceNot ProduceProduce4. 460, 0AirCraftNot Produce0, 600,0Suppose that the European Union considers aircraft a strategic industry and gives AirEurope a $10 million subsidy if it produces.Fill in the cells of the following payoff matrix to reflect the $10 million subsidy.AirEuropeProduceNot ProduceProduceAirCraftNot ProduceWith a $10 million subsidy, regardless of whether AirCraft produces or not, AirEuropeproduce if it wants to maximize its profit.True or False: Because AirEurope will enter the market if given a $10 million subsidy, AirCraft should not produce in this industry.O TrueO False

hetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makes t, it receives a profit of $60 million. If both companies decide to produce, they each lose $4 million. When a company decides not to produce, it zero profit. AirEurope Produce Not Produce Produce 4. 4 60, 0 irCraft Not Produce 0, 60 0,0 se that the European Union considers aircraft a strategic industry and gives AirEurope a $10 million subsidy if it produces. the cells of the following payoff matrix to reflect the $10 million subsidy. AirEurope Produce Not Produce Produce aft Not Produce

hetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makes t, it receives a profit of $60 million. If both companies decide to produce, they each lose $4 million. When a company decides not to produce, it zero profit. AirEurope Produce Not Produce Produce 4. 4 60, 0 irCraft Not Produce 0, 60 0,0 se that the European Union considers aircraft a strategic industry and gives AirEurope a $10 million subsidy if it produces. the cells of the following payoff matrix to reflect the $10 million subsidy. AirEurope Produce Not Produce Produce aft Not Produce

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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