9. Suppose there's a firm considering expanding to foreign. The demand it faces at home is...

Transcribed Image Text:

9. Suppose there's a firm considering expanding to foreign. The demand it faces at home is P = 93Q and the demand at foreign is P = 74Q. Given the technology the marginal cost is MC = 1, and the transport cost to move a unit of good across the two countries is t = 1. Fixed cost connected to R&D is F = 3 and the cost of a production plant is Pc = 1. There are no other costs. Calculate the profits if a) the expansion of the firm is through a horizontal multinational and b) if it is through a vertical multinational. What will the firm choose? 9. Suppose there's a firm considering expanding to foreign. The demand it faces at home is P = 93Q and the demand at foreign is P = 74Q. Given the technology the marginal cost is MC = 1, and the transport cost to move a unit of good across the two countries is t = 1. Fixed cost connected to R&D is F = 3 and the cost of a production plant is Pc = 1. There are no other costs. Calculate the profits if a) the expansion of the firm is through a horizontal multinational and b) if it is through a vertical multinational. What will the firm choose?

Answer rating: 100% (QA)

In this question it is Given that Demand at home is P 93Q Demand at foreign is P 74Q Marginal cost MC 1 Transport cost t 1 Fixed cost connected to RD ... View the full answer