Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each...

Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each firm produces high-speed trains for both domestic consumption and exporting. The high-tech firms in both countries have been operating businesses for decades without subsidy. However, they plan to produce a new model of high-speed train, and this new model requires a large amount of fixed cost, which is equivalent to 20 times of marginal cost. Each firm has asked its government to provide subsidy, which is amount to half of the fixed cost. Do you think the government should provide subsidy? Explain your reasoning.

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Rahul Sunny answered 2 years ago

Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is...

Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is endowed with abundant capital relative to labor and hence has a comparative advantage to specialize in Cars; whereas the Foreign country is endowed with abundant labor and specializes in Rice. Once they start trading, the price of cars decreases, and the price of rice increases in the Foreign country. How would the increase in the price of rice affect the income of each of...

Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is...

Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is endowed with abundant capital relative to labor and hence has comparative advantage to specialize in Cars; whereas the Foreign country is endowed with abundant labor and specializes in Rice. Once they start trading, the price of car decreases, and the price of rice increases in the Foreign country. How would the decrease in the price of car affect the income of each of the...

There are 2 countries, Home and Foreign, and 2 goods, Wine and Cheese. In each country...

There are 2 countries, Home and Foreign, and 2 goods, Wine and Cheese. In each country the are 150 workers. But not all workers are the same: some workers are cheese-makers and some workers are wine-makers. Each cheese-maker can produce one pound of cheese and zero bottles of wine, and each wine-maker can produce one bottle of wine and zero pounds of cheese. In the Home country there are 100 cheese-makers and 50 wine-makers, and in the Foreign country there...

There are two countries, Home and Foreign, each producing only one good by using labor and...

There are two countries, Home and Foreign, each producing only one good by using labor and capital. The supply and the quality of labor as well as the technology of production are identical in both countries and labor mobility between the countries is not allowed. The marginal productivity of the 1st unit of capital used is 20 whereas the marginal productivity of the 9th unit is 12 and there is a linear relation between the marginal product of capital and...

Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y...

Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y = 2,000, M = 400, P = 1.25; and Y* = 1,500, M* = 300, P* = 2.00. Suppose the demand for liquidity takes the same form in both countries, that is, L(R, Y) = L* (R, Y) = 2Y/100R (notice that the functions have the same form, but in each country the values of Y and R are different). (Advice: once again, don't...

Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y...

Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y = 2,000, M = 400, P = 1.25; and Y* = 1,500, M* = 300, P* = 2.00. Suppose the demand for liquidity takes the same form in both countries, that is, L(R, Y) = L* (R, Y) = 2Y/100R (notice that the functions have the same form, but in each country the values of Y and R are different). (Advice: once again, don't...

There are two countries, Home and Foreign. The two countries are identical except that Home has...

There are two countries, Home and Foreign. The two countries are identical except that Home has a labor force of 100 and Foreign has a labor force of 200. Given this allocation of labor across Home and Foreign, the value of the marginal product of labor in Home is 30 and the value of the marginal product of labor in Foreign is 20. If labor were to be free to move, the wage in both countries would be25. fi mmigration...

There are two countries, Home and Foreign. The two countries are identical except that Home has...

There are two countries, Home and Foreign. The two countries are identical except that Home has a labor force of 100 and Foreign has a labor force of 200. Given this allocation of labor across Home and Foreign, the value of the marginal product of labor in Home is 30 and the value of the marginal product of labor in Foreign is 20. If labor were to be free to move, the wage in both countries would be 25. What...

Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign...

Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign country exports pomegranates (the size of Foreign is not important for this question). What would happen to the equilibrium world price of pomegranates if demand for pomegranates in the Foreign country's market increases? a.The equilibrium world price will increase b.The equilibrium world price will decrease c.The equilibrium world price will not change part2 Imagine two countries are trading flower pots. The Home country is...

Consider international trade in a world with two countries, Home and Foreign, and a single good....

Consider international trade in a world with two countries, Home and Foreign, and a single good. At Home, the demand is D = 500 - 2P and the supply is S = 200 + 4P. At Foreign, the demand is D* = 600 - 2P and the supply is S* = 360 + 2P. How do I find the consumer and producer surplus in autarky?

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Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each...

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