Given the cost, quantity and exports information, calculation of firm's total cost, average cost, profits in local and foreign market.
The Home firm is considering whether to enter the Foreign market. Assume that the Home firm has the following costs and demand information:
Fixed cost = $135
Marginal cost = $12 per unit
Local price = $28
Local quantity = 20
Export price = $17
Export quantity= 12
a. Compute the Home firm's total costs from selling only in the local market.
b. Illustrate what is the Home firm's average total cost from selling only in the local market?
c. find out the Home firm's profit from selling only in the local market.
d. Should the Home firm enter the Foreign market? Briefly describe why.
e. find out the firm's profit from selling to BOTH markets.
f. The United States DOC determines whether dumping takes place. In order to determine this, they find out the "fair market value" of a good and the "dumping margin". There are 3 ways to determine the fair market value. The first way is simply to use the price of the product in the exporter's (home) market as the fair market value.
i. What are the other 2 ways that the fair market value can be determined?
a. Define the "dumping margin"
ii. Define the"dumping margin"
g. Use the DOC's first method of determining fair market value (using the home price of the product) to answer thw problem below.
i. What is the fair market value of the product Home sells?
ii. What is the dumping margin?
iii. Is the Home firm dumping according to DOC rules?
a. If yes, at what dollar value will the DOC set the special tariff?