Transcribed Image Text:Exercise 4.2
Consider the response of firms in a world with two identical countries (Home and Foreign). Assume that a firm must incur an additional cost t for each unit of output that it sells to customers across the border.
Consider the decisions of firms 1 and 2 (with marginal costs c, and c?) in the figures below.
Firm 2 can profitably operate
A. in both the domestic and the export markets.
Click in calart unir anewer and then click t
-ewar
Cost, C and Price. P
Domestic (Home) Market
Quantity
Firm 2 can profitably operate
A. in both the domestic and the export markets.
O B. in the export market only.
OC. in neither the domestic nor the export markets.
OD. in its domestic market only.
MC?
MC?
D
Co:
8 c
C?
2
Export (Foreign) Market
09
Quantity
Quantity
MC?
-MC,
D
Q
MC1
D
8C?1
Quantity
Consider the response of firms in a world with two identical countries (Home and Foreign). Assume that a firm must incur an additional cost t for each unit of output that it sells to customers across the border.
Consider the decisions of firms 1 and 2 (with marginal costs c, and c?) in the figures below.
Firm 2 can profitably operate
A. in both the domestic and the export markets.
Click in calart unir anewer and then click t
-ewar
Cost, C and Price. P
Domestic (Home) Market
Quantity
Firm 2 can profitably operate
A. in both the domestic and the export markets.
O B. in the export market only.
OC. in neither the domestic nor the export markets.
OD. in its domestic market only.
MC?
MC?
D
Co:
8 c
C?
2
Export (Foreign) Market
09
Quantity
Quantity
MC?
-MC,
D
Q
MC1
D
8C?1
Quantity
