Improved long run productivity

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Reference no: EM1319729

Assume the Japanese industry started in 1955 with production of 100,000 cars per year and an initial cost of 2,000 and that production grew 50% per year for the next five years and then 25% per year for the next ten years. If Japanese relative costs compared to the US dropped 20% for each doubling of accumulated experience, in which year would Japanese costs equal US costs if the US cost per car in 1955 was $1500? Given a real discount rate on Japanese government bonds of 6% during this period, by 1970 was the cost to Japan of protecting this industry recovered due to its improved long run productivity compared to having imported cars from the US?

Reference no: EM1319729

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