Reference no: EM131387273
Consider a model with two countries called France and Germany. France has one automaker, called Citroen. Germany has a competitor company, called Volkswagen. Citroen can produce cars at a constant marginal cost of $1,000 each. VW can produce cars at a constant marginal cost of $2,000 each. Within each country, the demand for cars is given by the same demand curve:Q = (18 -P) X (10, 000),
where Q is the number of cars demanded in that country per month and P is the price per car in that country, in thousands of dollars. Assume that no one other than Citroen or VW can transport cars between the two countries, so it is possible for the price of cars in the two economies to be different.
(a) Suppose initially that both economies are in autarky. What will be the price and the quantity sold in each country?
(b) Suppose that we now have free trade between the two economies. There is no cost to trans porting the cars across borders for either firm. Suppose that the two corporations set their quantities in each market simultaneously. For any given quantity qFV that Citroen expects VW to sell in the French market, find the profit-maximizing quantity qFC that Citroen will sell in the French market. Using your answer, draw Citroen's reaction function for the French market.
(c) Using logic parallel to (b), draw VW's reaction function for the French market on the same diagram.
(d) Assume that each firm correctly guesses how much the other will produce in each market.
What will be the price charged and thequantity sold in each market?
|
Determine the value to the organization and its customers
: There is alot of reference on value, but there is very little specific measurements or methods to determine the value to the organization and its customers.
|
|
The federal reserve sets the target growth rate of money
: The Federal Reserve sets the target growth rate of money (M1) at 2% from now until the end of this year, while the European Central Bank (ECB) sets its target growth rate of money at 7% during the same period. The current spot rate is $1.12 per euro...
|
|
To what relief if any is sierra pacific entitled
: After learning of these facts, Sierra Pacific brought an action against Carter. To what relief, if any, is Sierra Pacific entitled?
|
|
Determine the mass moment of inertia
: A solid of revolution is produced by revolving the area shown 360° around the y axis. Use integration to determine the mass moment of inertia about the axis of revolution assuming the solid has uniform density of 2000 kg/m3.
|
|
What will be price charged and quantity sold in each market
: Consider a model with two countries called France and Germany. France has one automaker, called Citroen. Germany has a competitor company, called Volkswagen. Citroen can produce cars at a constant marginal cost of $1,000 each. Suppose initially that..
|
|
Complete the process design matrix
: Develop a 700-word Executive Summary in which you identify appropriate design approaches for the selected product (Dr. Peppper soda) and service (Verizon phone service) used in the Process Design Matrix.
|
|
Aims and objectives of the project
: Select local organization or company in Oman Flow the instruction. Statements of the issue to be investigated. Aims and objectives of the project and Reason for the choice of business
|
|
Who should be held liable
: While driving to make a call on a potential customer, Morris negligently collides with Hudson. Hudson sues Acme and Morris. Who should be held liable?
|
|
What are wilsons rights if any against ruth
: Ruth nevertheless sells the chest to Harold. Wilson then discovers these facts. What are Wilson's rights, if any, against Ruth?
|