Your main You are a manager at Toyota who specializes in sales to the US market....

 

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Your main You are a manager at Toyota who specializes in sales to the US market. competitor is Honda, which sells an essentially identical car in the US. For the purposes of this question, you can assume that these are these two producers constitute the entire market. The demand for cars in the US is given by a downward sloping curve D (p) = p-, and we will assume 8 = 2. Both firms produce with constant marginal cost Your competitor Honda is entirely identical. c(y) = y. 1. You compete with Honda by announcing a price. Consumers then choose the car with the lowest price. Suppose both you and the manager of Honda are shortsighted; you both know you will be fired next year anyway, let's say. What price and quantity do you expect to prevail in this market? Why? [10] 2. Suppose Honda and Toyota merged. What price and quantity would you expect in this case? [5] The US government becomes concerned about the extent of Japanese import penetration in the US car market. After some lobbying from Toyota and Honda, the Japanese government offers to implement a Voluntary Export Restriction (VER) policy. Under the terms of the VER, the Japanese government promises to fine Toyota and Honda if either firm's exports to the US exceed a certain amount, which we will refer to as the export quota. 3. Why would you, as a manager of Toyota, lobby for a VER [10] 4. What export quota and size of fine would you lobby for?[10] Your main You are a manager at Toyota who specializes in sales to the US market. competitor is Honda, which sells an essentially identical car in the US. For the purposes of this question, you can assume that these are these two producers constitute the entire market. The demand for cars in the US is given by a downward sloping curve D (p) = p-, and we will assume 8 = 2. Both firms produce with constant marginal cost Your competitor Honda is entirely identical. c(y) = y. 1. You compete with Honda by announcing a price. Consumers then choose the car with the lowest price. Suppose both you and the manager of Honda are shortsighted; you both know you will be fired next year anyway, let's say. What price and quantity do you expect to prevail in this market? Why? [10] 2. Suppose Honda and Toyota merged. What price and quantity would you expect in this case? [5] The US government becomes concerned about the extent of Japanese import penetration in the US car market. After some lobbying from Toyota and Honda, the Japanese government offers to implement a Voluntary Export Restriction (VER) policy. Under the terms of the VER, the Japanese government promises to fine Toyota and Honda if either firm's exports to the US exceed a certain amount, which we will refer to as the export quota. 3. Why would you, as a manager of Toyota, lobby for a VER [10] 4. What export quota and size of fine would you lobby for?[10]

Answer rating: 100% (QA)

1 Under the given scenario where both Toyota and Honda are shortsighted and know they will be fired next year they will both choose to charge the price that maximizes their immediate profit regardless ... View the full answer