Question

Please I need today answer for This question and it is very important and I need solution for this issue with all the details , and help me with all the details.Please write your answer to me by typning  not by hand writing, so that I can read and understand your answer clearly.thanks in advance/Ha

Question (foreign investment)

a-If there are internal economies of scale, why would it ever make sense for a firm to produce the same good in more than one production facility?

b-Consider the model where firms have different levels of marginal cost ( “Firm Responses to Trade: Winners, Losers, and Industry Performance”).Explain why trade liberalisation has the same effect on an economy as an increase in the aggregate productivity of an economy (i.e. that the average output per worker increases).

Answer 1

I am trying to help you.

A. Sometimes firm produce one good in more than one production facilities. This is due to, if there is a highly-skilled labor pool availablein the other factory, subsidies and/or tax reductions, and partnerships and joint ventures or anything that can cut down on costs to company in a specific industry.

B. Researchers conducted a study regarding the influence of liberalization on the economy. The results show that the input market considerations dominate the competitive effect as an explanation for the productivity growth that took place during trade liberalization in Brazil. Moreover, a reduction in input tariffs seems to cause a rise in mark-ups, while a reduction in output tariffs does the opposite. Further experiments showed that the input tariffs effect is much more pronounced in the technology and capital-intensive sectors than in the natural resources and labor-intensive ones.

In the aftermath of the Chilean trade liberalization, Pavcnik (2002) finds that roughly two thirds of the 19% increase in aggregate productivity is the result of the reallocation of resources from less to more efficient producers. While early empirical studies focused on documenting these compositional effects and contrasting export-orientated, import-competing, and non-traded industries, more recent research has connected intra-industry reallocation to direct policy measures of trade liberalization such as import tariffs.

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