Suppose that Samsung's production costs are the same in both China and India.Also suppose that Samsung can produce cellphones in China for an average cost of $10 per phone for 300 million phones, $12 per phone for 200 million phones, and $15 per phone for 100 million phones.If customers in India demand 100 million phones and customers in China demand 200 million phones, and there are transportation costs of $6 per phone, Samsung's lowest cost option is to

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Quizplus · Accepted Answer

Producing only in China and exporting to India is the lowest cost option because producing 200 million phones in China costs $12 per phone, and with an additional $6 for transportation, the total cost is $18 per phone. Producing 100 million phones in China for $15 per phone (without the need for export costs for these) is cheaper than any production scenario in India, assuming the same production costs in India.

Suppose That Samsung's Production Costs Are the Same in Both