The call industry has become increasingly competitive in recent years, with the entry of many overseas...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The call industry has become increasingly competitive in recent years, with the entry of many overseas call centers. However, after years of outsourcing, call centers have returned to the US. After years of sending call center jobs to India, the Philippines, Mexico and other countries, companies are bringing them back to the US. An estimated 5 million Americans are employed in call centers. The trend, industry watchers said, is driven by changes in technology, rising overseas labor costs. You have been asked to evaluate the call center industry, based on information on the two largest call center supply markets, the mid-west US and the Philippines. The average cost curves for individual call centers in each location are as follows (in tens of thousands of dollars): ATC US = 14-6q + q^2 ATC Philippines = 18 - 8q + q^2 Overall demand for call centers is given by: Q = 800 - 100P Where Q = number of call centers demanded and P equals the price of a call center, in tens of thousands of dollars. Q2 a) Which location will most firms looking for call center services likely pursue? Why? Q2 b) Given your answer in part a, what will the long run price for call centers be in the market? Assume that the market remains competitive in the long run, given the low barriers to entry. Q2 c) If this is still a perfectly competitive market long term, how many firms will there be in the long run? What will HHI be? Q2 d) Several years pass and many firms have now entered the call center industry in the Philippines instead of the US. As a result of this additional entry, labor prices in the Philippines have increased. Thus, the total cost curve for firms running call centers in the Philippines has increased to be: TC Philippines = 16+ q^2 where q is the number of call centers operated by a firm. The estimated number of firms running call centers in the Philippines is now 200. In response to political pressure over perceived outsourcing of call centers to the Philippines, the US government decides to impose a tax of $10,000 (i.e., tax = 1, in tens of thousands of dollars) on call centers owned by US firms in the Philippines. For simplicity, assume that all of the call centers in the Philippines represent call centers owned by US firms. You may assume that the overall demand function is unchanged. Q2 d i) What is the overall supply curve for call centers in the Philippines before the tax? Q2 D ii) What is the market price before the tax is imposed? Q2 d iii) What is the market price after the tax is imposed? Who pays the tax? (i.e., the consumer or the call center suppliers)? The call industry has become increasingly competitive in recent years, with the entry of many overseas call centers. However, after years of outsourcing, call centers have returned to the US. After years of sending call center jobs to India, the Philippines, Mexico and other countries, companies are bringing them back to the US. An estimated 5 million Americans are employed in call centers. The trend, industry watchers said, is driven by changes in technology, rising overseas labor costs. You have been asked to evaluate the call center industry, based on information on the two largest call center supply markets, the mid-west US and the Philippines. The average cost curves for individual call centers in each location are as follows (in tens of thousands of dollars): ATC US = 14-6q + q^2 ATC Philippines = 18 - 8q + q^2 Overall demand for call centers is given by: Q = 800 - 100P Where Q = number of call centers demanded and P equals the price of a call center, in tens of thousands of dollars. Q2 a) Which location will most firms looking for call center services likely pursue? Why? Q2 b) Given your answer in part a, what will the long run price for call centers be in the market? Assume that the market remains competitive in the long run, given the low barriers to entry. Q2 c) If this is still a perfectly competitive market long term, how many firms will there be in the long run? What will HHI be? Q2 d) Several years pass and many firms have now entered the call center industry in the Philippines instead of the US. As a result of this additional entry, labor prices in the Philippines have increased. Thus, the total cost curve for firms running call centers in the Philippines has increased to be: TC Philippines = 16+ q^2 where q is the number of call centers operated by a firm. The estimated number of firms running call centers in the Philippines is now 200. In response to political pressure over perceived outsourcing of call centers to the Philippines, the US government decides to impose a tax of $10,000 (i.e., tax = 1, in tens of thousands of dollars) on call centers owned by US firms in the Philippines. For simplicity, assume that all of the call centers in the Philippines represent call centers owned by US firms. You may assume that the overall demand function is unchanged. Q2 d i) What is the overall supply curve for call centers in the Philippines before the tax? Q2 D ii) What is the market price before the tax is imposed? Q2 d iii) What is the market price after the tax is imposed? Who pays the tax? (i.e., the consumer or the call center suppliers)?
Expert Answer:
Related Book For
Posted Date:
Students also viewed these economics questions
-
Emergency Medicine plays a vital role in the health care continuum in the United States. Michael Porters' five forces model of industry analysis provides an insight into the economics of emergency...
-
Does the fact that the strategic petroleum reserve has never been used to offset shortfalls caused by an embargo mean that the money spent in creating the reserve has been wasted? Why or why not?
-
Hinkel Rotary Engine, Ltd., produces four-, six-, and eight-cylinder models of automobile engines. The firm's profit for each four-cylinder engine sold during its quarterly production cycle is $1,800...
-
How will two dangling vertical sheets of paper move when you blow between them? Try it and see.
-
What is a system property?
-
Integrative Case 10.1 projected financial statements for Starbucks for Years +1 through +5. This portion of the Starbucks Integrative Case applies the techniques in Chapter 11 to compute Starbucks...
-
A student has three marks for a computer exam, the first mark is being for the first course exam, the second mark is being for the second course exam, and the third mark is being for his quizzes and...
-
Estimate the area between f (x) = x - 5x + 6x + 5 and the x-axis on [0; 4] using n = 5 subintervals by using the Left endpoint 12 10 40197501.
-
How do family members influence each others buying behaviour?
-
Under what circumstances would qualitative research be more appropriate than quantitative research?
-
What sales forecasting approaches would be most suitable for the launch of a new family car?
-
Chic is a small company making mid-range leather bags for both men and women. It is based in a small town in the north-west of England. It is run by a husband and wife team. Business is doing well,...
-
What are the stages of new product development?
-
Write a paper on Quantitative & Technical Analysis it may seem inevitable that market leaders will find their market share eroded substantially as a result of technological change. Provide...
-
The process of collaborative goal setting by a manager and subordinate, the extent to which goals are accomplished is a major factor in evaluating and rewarding the subordinate's performance. It is...
-
All of the following are correct as to how the PBGC is financed except A. Assets of defined benefit plans which have been taken over. B. Insurance premiums paid by plan participants. C. PBGC...
-
Which of the following models projects the likelihood of the client achieving a goal of financial independence? A. Historic return. B. Probability analysis. C. Straight-line return. D. Stress-tested...
-
Which of the following is a probability analysis? A. Historic returns. B. Monte Carlo. C. Straight-line returns. D. Stress testing.
Study smarter with the SolutionInn App