Suppose a foreign firm has the following cost and demand data: $100 Fixed costs Marginal costs $10 per unit Local price $25 Local quantity 10 Export price $15 Export quantity 10 (a) What is the firm's average cost and profits earned from selling in its local market? Now suppose that the firm sells an additional 10 units abroad at the price of $15. Is it still worthwhile to sell these extra units? (b) How can the countries abroad respond to the pricing strategy in (b) employed by the foreign firm?

Suppose a foreign firm has the following cost and demand data: $100 Fixed costs Marginal costs $10 per unit Local price $25 Local quantity 10 Export price $15 Export quantity 10 (a) What is the firm's average cost and profits earned from selling in its local market? Now suppose that the firm sells an additional 10 units abroad at the price of $15. Is it still worthwhile to sell these extra units? (b) How can the countries abroad respond to the pricing strategy in (b) employed by the foreign firm?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Suppose a foreign firm has the following cost and demand data:
Fixed costs
Marginal costs
Local price
$100
$10 per unit
$25
Local quantity
10
Export price
$15
Export quantity 10
(a) What is the firm's average cost and profits earned from selling in
its local market? Now suppose that the firm sells an additional 10
units abroad at the price of $15. Is it still worthwhile to sell these
extra units?
(b) How can the countries abroad respond to the pricing strategy in (b)
employed by the foreign firm?

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