ABC D Exercise 42 Question Help Consider the response of fir

A,B,C, D.

Exercise 4.2 Question Help Consider the response of firms in a world with two identical countries (Home and Foreign). Assume that a firm must incur an additional cost t for each unit of output that it sells to customers across the border. Consider the decisions of fims 1 and 2 (with marginal costs c1 and c2) in the figures below. Domestic (Home) Market Export (Foreign) Market a. c2? Mic, Mc2 MC L-MC Quantity Quantity Firm 2 can profitably operate O A. in both the domestic and the export markets

Solution

Firm 2 can operate profitably only in the domestic market. In the foreign market, the marginal cost of the firm 2 will be more than the demand at that price and they can\'t sell any good at that price. But, they can sell them in the domestic market and make some profit.

The answer is \"D\", in the domestic market only.