international business Essay example

636 WordsJun 1, 20143 Pages
International Trade Spring 2014 Problem Set 2 Answer Key 1. ABC Corporation is a monopolistic competitor. It has fixed costs of $5,000 and a constant marginal cost of $500 per unit of production. It faces a demand curve described by this equation: P = 1,000 - 10Q. A) Find ABC's equilibrium price and quantity. B) Will it earn monopoly profits at this equilibrium? C) What will happen to ABC's price, quantity, and monopoly profits in the long run? Answer: A) The demand curve for this equation has x and y intercepts of Q = 100 and P = 1000. Its slope is -10. Its MR is MR = 1000 - 20 Q and its MR curve has x and y intercepts of Q = 50 and P = $1,000 and slope of -20. To derive the…show more content…
With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. 3. (Scenario: Finnish Steel) What is the purpose of this €60-per-ton tariff? Answer: The purpose of tariff on imported steel is to protect Finnish steel producers from foreign competition 4. (Scenario: Finnish Steel) What is likely to happen to Finnish production of steel and the price of steel sold in Finland after the €60-per-ton tariff is imposed? Answer: Finnish steel production will rise, and the Finnish price of steel will rise. 5. (Scenario: Finnish Steel) Who will gain and who will lose as a result Finland's €60-per-ton tariff on imported steel? Answer: Finnish steel producers will be better off and Finnish steel consumers will be worse off with the tariff than without it. 6.(Scenario: Finnish Steel) How much total tariff revenue will the Finnish government collect as a result of the €60-per-ton tariff? Answer: Government revenue = import × tariff per ton= (600,000-300,000)×€60 = €18 million 7.(Scenario: Finnish Steel) What will happen to the Finnish price of steel if Finnish demand increases and the tariff remains at €60-per-ton? Answer: Since the Finland is a small country, world price will not change even if Finnish demand changes. Also domestic steel price after tariff is imposed will remain same.
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