International Economics 13th Edition by Robert Carbaugh

تمرين 2

Table 9.8 illustrates the revenue conditions facing ABC, Inc., and XYZ, Inc., which operate as competitors in the U.S. calculator market. Each firm realizes constant long-run costs (MC 5 AC) of $4 per unit. On graph paper, plot the enterprise demand, marginal revenue, and MC = AC schedules. On the basis of this information, answer the following questions.
a. With ABC and XYZ behaving as competitors, the equilibrium price is $___ and output is____. At the equilibrium price, U.S. households attain $ of consumer surplus, while company profits total $____.
b. Suppose the two organizations jointly form a new one, JV, Inc., whose calculators replace the output sold by the parent companies in the U.S. market. Assuming that JV operates as a monopoly and that its costs (MC = AC) equal $4 per unit, the company's output would be at a price of $___ , and total profit would be $___. Compared to the market equilibrium position achieved by ABC and XYZ as competitors, JV as a monopoly leads to a deadweight loss of consumer surplus equal to $___. c. Assume now that the formation of JV yields technological advances that result in a per-unit cost of only $2; sketch the new MC 5 AC schedule in the figure. Realizing that JV results in a deadweight loss of consumer surplus, as described in part b, the net effect of the formation of JV on U.S. welfare is a gain/loss of $___. If JV's cost reduction was due to the wage concessions of JV's U.S. employees, the net welfare gain/ loss for the United States would equal $___. If JV's cost reductions resulted from changes in work rules leading to higher worker productivity, the net welfare gain/loss for the United States would equal $____.