Figure 14.2 The US Market for Imported Toyotas
-In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₂ leads to

Question

Figure 14.2 The US Market for Imported Toyotas

-In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₂ leads to

Quizplus · Accepted Answer

A shift in the marginal cost curve will lead to a change in the price that Toyota charges in the market. As a monopolist, Toyota will set its price at the point where marginal revenue equals marginal cost. With the increase in marginal cost, Toyota will raise its price, resulting in a decrease in quantity demanded. However, the extent to which Toyota can pass on the increased cost to consumers will depend on the price elasticity of demand. If demand is elastic, Toyota will have to bear some of the cost increase, and the pass-through will be partial. Therefore, a shift in the marginal cost curve from MC₀ to MC₂ is likely to result in a partial pass-through of the depreciation of the dollar.

Figure 142 the US Market for Imported Toyotas