Need as much details as possible. Microeconomics. Japanese firms and Chinese firms are competing in a...
Need as much details as possible. Microeconomics.
Japanese firms and Chinese firms are competing in a single market. The cost function of a Japanese firm is TC1(Q)=8+2Q2 and the cost function of a Chinese firm is TC2 (Q)=16+Q2. Which of the following statements are correct about the long run equilibrium:
i. Chinese firms will produce more units than
Japanese firms.
ii. Japanese firms will produce q=0.
a. Both statements are false.
b. Only statement i. is correct.
c. Both statements are correct.
d. Only statement ii. is correct.
Homework Answers
c) Both statements are correct.
The marginal cost for the Chinese firm is lower ( =1) as compared to the MC of the Japanese firm (=2). In the long run, only the MC matters and thus the Chinese firm produces more efficiently ( more units). In the long run, it will capture the whole market and Japanese firm will sell 0 units.
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