5. Foreign direct investment versus licensingGiocattolo is a profit-maximizing firm producing toy cars-a capital-intensive good-which are sold in its home country, Italy, and abroad in Spain.Giocattolo chose foreign production as a method of penetrating the Spanish market and has to decide whether it is more efficient to directly invest inSpain to establish a production subsidiary or to license the technology to a Spanish firm to produce its goods.On the following graph, AVC Spain is the average variable cost curve of a Spanish firm producing toy cars. (This curve represents costs such as laborand materials.) The curve ATC subsidiary represents the total unit costs Giocattolo will face if it establishes a subsidiary in Spain.PER-UNIT COST (Dollars)1098210015ATC Subsidiary+10530 45 60 75 90PRODUCT (Thousands)120AVCSpain+135 150? Suppose Giocattolo estimates the demand for toy cars in Spain as 45,000 toys per year.Based on the curves AVC Spain and ATC Subsidiary, what is Giocattolo's best strategy?Establish a subsidiary factory in Spain.Invest in a country risk analysis.O License production technology to a Spanish firm.Suppose that Giocattolo's fixed cost of managing foreign operations increased.Which of the following best describes how Giocattolo's decision making may change?The subsidiary becomes completely inefficient at higher levels of output.The subsidiary remains more efficient than licensing at output levels of above 60,000 toy cars.Licensing remains more efficient than the subsidiary at a higher level of output.The decision to license instead of forming a subsidiary will occur at a lower level of output.

This question asked us to determine Giocattolo's best strategy (establish a subsidiary factory,…

Suppose Giocattolo estimates the demand for toy cars in Spain as 45,000 toys per year. Based on the curves AVC Spain and ATC Subsidiary, what is Giocattolo's best strategy? Establish a subsidiary factory in Spain. Invest in a country risk analysis. License production technology to a Spanish firm. Suppose that Giocattolo's fixed cost of managing foreign operations increased. Which of the following best describes how Giocattolo's decision making may change? The subsidiary becomes completely inefficient at higher levels of output. The subsidiary remains more efficient than licensing at output levels of above 60,000 toy cars. O Licensing remains more efficient than the subsidiary at a higher level of output. O The decision to license instead of forming a subsidiary will occur at a lower level of output.

Suppose Giocattolo estimates the demand for toy cars in Spain as 45,000 toys per year. Based on the curves AVC Spain and ATC Subsidiary, what is Giocattolo's best strategy? Establish a subsidiary factory in Spain. Invest in a country risk analysis. License production technology to a Spanish firm. Suppose that Giocattolo's fixed cost of managing foreign operations increased. Which of the following best describes how Giocattolo's decision making may change? The subsidiary becomes completely inefficient at higher levels of output. The subsidiary remains more efficient than licensing at output levels of above 60,000 toy cars. O Licensing remains more efficient than the subsidiary at a higher level of output. O The decision to license instead of forming a subsidiary will occur at a lower level of output.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Short-run supply and long-run equilibrium Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
In 2005, Hydrola make and updated their website with different languages, which enables the foreign customer to view and build an international network between them, which that lead to the company expand in the region without local intermediaries due to the internationalization of the organizational culture. Following the creation of its website, Hydrola received numerous expressions of interest from abroad. Contrary to the CEO's expectations, requests were not coming from European and American markets, but rather from Africa, the Middle East, and Latin America. The company has selected Tunisia, Senegal, and Mexico as the initial choice of expansion markets. Hydrola's business is the production and maintenance of hydraulic and pneumatic spare parts for industrial machinery. Besides the countries mentioned above, what other countries are potential expansions for Hydrola? Please propose 5 countries and the reason (Except for China), and the 5 main indicators related to export strategy…
HP has developed a new, high-end, high-resolution printer, which can print 40 pages per minute. Its market research identified two target segments of customers: 3,500 large businesses and 6,500 university labs. A large business has a valuation of $900 for the new printer, whereas a university lab has a valuation of $630. HP’s variable cost for the printer is $450/unit; all fixed costs are sunk. Assume that each customer needs at most one new HP printer (i.e., no customer will buy multiple units). (a) Suppose that HP cannot price discriminate the two segments of customers, i.e., it can charge only one price for its printer. What is HP’s optimal price for the new printer? What is its maximum profit? (b) Suppose that HP can install an extra chip in the printer to slow down printing to 15 pages per minute. Such a chip costs HP $20 to make and install for each printer. The slower version of the printer is valued at $700 by a large business customer and $600 by a university lab. With…
Duane is a long-haul truck driver who specializes in transporting oversize loads across Canada and the U.S.A. for his Markham, Ontario based company. The nature of his work requires: long hours due to specialized loading, driving, and delivery procedures; driving at a slower than normal speed, often at night to avoid peak traffic; taking longer routes to avoid obstacles such as low height or low weight bridges, and crossing the Canada–USA border. Truckers in this occupation are often under tight deadlines to deliver on time, or their employer will face financial penalties. a) Identify three possible work-related injuries and illnesses/diseases that might result from working in this occupation and discuss the Workers’ Compensation coverage that would apply in each case. b) Discuss how his employer would obtain the necessary information to complete the employer and incident analysis reports. c) Compare and contrast the Canadian compensation system with the compensation available to an…
COURSE: MICROECONOMICS - Cournot Model:In the market for a given good there are only 2 firms satisfying the demand, and their respective total cost functions respond to the form: CTi = 10Qi + 5 and the demand is estimated to be: P = 31 - QIf the decision variable for both firms is that the quantity they will produce and realize will be decided simultaneously it is asked to:(a) calculate the profit and reaction function of each firmb) graph market equilibriumc) calculate the profits that both companies will obtain in equilibrium
Suppose that the inverse demand for aloe juice in Greece is given by P = 100 – 2Q, where P is the price per bottle (1000ml) of aloe juice and Q is the total quantity, i.e., number of bottles, supplied in the market. There are two aloe juice manufacturers in Greece, Aloe Health and Aloe Wealth, operating under similar cost conditions. Each manufacturer's cost function is C(q) = 4qi, i =1,2, where q¡ is the manufacturer's individual quantity produced and Q = qı + q2. (a) Based on demand conditions every year, they decide, independently of each other, the quantity of aloe juice that will be supplied, letting the market determine the price per bottle. Find the equilibrium price and each firm's profit in this market. %3D (b) Consider that the above two manufacturers form a cartel, agreeing to fix their total quantity in such a way that the market maintains a collusive price. For simplicity, the eventual cartel directory will determine the target total-quantity and price pair, and each firm…
Igrushka is a profit-maximizing firm producing wooden dolls-a capital-intensive good-which are sold in its home country, Russia, and abroad in France. Igrushka chose foreign production as a method of penetrating the French market and has to decide whether it is more efficient to directly invest in France to establish a production subsidiary or to license the technology to a French firm to produce its goods. On the following graph, AVCFrance is the average variable cost curve of a French firm producing wooden dolls. (This curve represents costs such as labor and materials.) The curve ATCSubsidiary represents the total unit costs Igrushka will face if it establishes a subsidiary in France. PER-UNIT COST (Dollars) 10 9 8 1 0 0 ATC 15 Subsidiary 30 45 60 75 90 105 120 PRODUCT (Thousands) AVC France 135 150 ? 4
am. 114.
Hercules Films is deciding on the price of the video release of its film Son of Frankenstein. Its marketing people estimate that at a price of p dollars, it can sell a total of q = 280,000 - 20,00 copies. What price will bring in the greatest revenue? = $
Kasey Puzzle, Inc. sells geography-based puzzles. Kasey currently sells 25,000 units a month for $40 each, has variable costs of $20 per unit, and fixed costs of $300,000. Kasey Puzzle is considering increasing the price of its units to $60 per unit. This will not affect costs, but demand is expected to drop 20%. Should Kasey Puzzle increase the price of its product? с Multiple Choice O O Yes, profit will increase $500,000. No, profit will decrease $500,000. No, profit will decrease $300,000. Yes; profit will increase $300,000.
Looking at the Table, Profit, Cost and Revenue Functions, Quant is the quantity of output, C(Q) is the Total Cost of production for corresponding quantities of output, R(Q) is the corresponding Total Revenue at each level of output Q, if all output is sold and PRF(Q) is the Total Profit for each corresponding output level. PRF(Q) is calculated as R(Q)-C(Q). Using this information, does the company make its highest profit where R(Q) is highest? a. No, because the highest possible revenue may be at an output level where the cost of output may exceed the revenue generated at that output level. In this problem, the highest profit is at output level 15 Ob. Yes, because there is no way that cost can exceed revenue when revenue is maximized. Cc. No, because the highest possible revenue may be at an output level where the cost of output may exceed the revenue generated at that output level. In this problem, the highest profit is at output level 10 or 12 or in between. Od. Yes, because the…
7