Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀.
Figure 9.1. International Joint Venture

-Consider Figure 9.1.Assume Venture Company's formation yields new cost reductions, indicated by MC₁=AC₁, which result from technological advances.Compared to the original competitive equilibrium, the net effect of Venture Company's formation on welfare now is

Question

Figure 9.1 illustrates the market conditions facing SKF and Timken, initially operating as competitors in the domestic ball bearing market. Each firm realizes constant long-run costs, MC₀=AC₀.
Figure 9.1. International Joint Venture

-Consider Figure 9.1.Assume Venture Company's formation yields new cost reductions, indicated by MC₁=AC₁, which result from technological advances.Compared to the original competitive equilibrium, the net effect of Venture Company's formation on welfare now is

Quizplus · Accepted Answer

The formation of Venture Company and the resulting cost reductions due to technological advances typically lead to increased efficiency and lower costs for consumers. This can enhance overall welfare by making products or services more affordable and accessible, thus leading to a welfare gain.

Figure 91 Illustrates the Market Conditions Facing SKF and Timken, Initially