1.For each of the following examples, explain whether this is a case of external or internal
economies of scale:
a.Most musical wind instruments in the United States are produced by more than a
dozen factories in Elkhart, Indiana.
b.All Hondas sold in the United States are either imported or produced in Marysville,
Ohio.
c.All airframes for Airbus, Europe’s only producer of large aircraft, are assembled in
Toulouse, France.
d.Hartford, Connecticut is the insurance capital of the northeastern United States. External economies of scale: Cases a and d. The productions of these two industries concentrate in a few locations and successfully reduce each industry's costs even when the scale of operation of individual firms remains small. External economies need not lead to imperfect competition. The benefits of geographical concentration may include a greater variety of specialized services to support industry operations and larger labor markets or thicker input markets.
Internal economies of scale: Cases b and c. Both of them occur at the level of the individual firm. The larger the output of a product by a particular firm, the lower its average costs. This leads to imperfect competition as in petrochemicals, aircraft, and autos.
2.In perfect competition, firm set price equal to marginal cost. Why isn’t this possible
when there are internal economies of scale?
Unlike the case of perfectly competitive markets, under monopoly marginal revenue is not equal to price. The profit maximizing output level of a monopolist occurs where marginal revenue equals marginal cost. Marginal revenue is always less than price under imperfectly competitive markets because to sell an extra unit of output the firm must lower the price of all units, not just the marginal one.
3.It is often argued that the existence of increasing returns is a source of conflict between
countries, since each country is better off if it can increase its production in those industries characterized by economies of scale. Evaluate this view in terms of both the monopolistic competition and the external economy models.
Both internal economies of scale (which may lead to monopolistic competition) and external economies of scale could lead to increasing returns.
By concentrating the production of each good with economies of scale in one country rather
than spreading the production over several countries, the world economy will use the same amount of labor to produce more output.
In the monopolistic competition model, the concentration of labor benefits the host country. The host country can capture some monopoly rents. But the rest of the world may hurt and have to face higher prices on its consumption goods.
In the external economies case, such monopolistic pricing behavior is less likely since imperfectly competitive markets are less likely.
4.Suppose the two countries we considered in the numerical example on pages 132-135
were to integrate their automobile marker with a third country with an annual market for 3.75 million automobiles. Find the number of firms, the output per firm, and the
1
price per automobile in the new integrated market after trade.
FAC cX1Pc bnSXn
PACn2S n15.8FbHowever, since you will never see 0.8 firms, there will be 15 firms that enter the market, not 16 firms since the last firm knows that it can not make positive profits. The rest of the solution is straight-forward. Using X=S/n, output per firm is 41,666 units. Using the price equation, and the fact that c=5,000, yields an equilibrium price of $7,000.
5.Evaluate the relative importance of economies of scale and comparative advantage in
causing the following:
a.Most of the world’s aluminum is smelted in Norway or Canada.b.Half of the world’s large jet aircraft are assembled in Seattle.
c.Most semiconductors are manufactured in either the United States or Japan.d.Most Scotch whiskey comes from Scotland.
e.Much of the world’s best wine comes from France.
a. The relatively few locations for production suggest external economies of scale in
production. If these operations are large, there may also be large internal economies of scale in production.
b. Since economies of scale are significant in airplane production, it tends to be done by a small number of (imperfectly competitive) firms at a limited number of locations. One such location is Seattle, where Boeing produces.
c. Since external economies of scale are significant in semiconductor production, semiconductor industries tend to be concentrated in certain geographic locations. If, for some historical reason, a semiconductor is established in a specific location, the export of semiconductors by that country is due to economies of scale and not comparative advantage.
d. \"True\" scotch whiskey can only come from Scotland. The production of scotch whiskey
requires a technique known to skilled distillers who are concentrated in the region. Also, soil and climactic conditions are favorable for grains used in local scotch production. This reflects comparative advantage.
e. France has a particular blend of climactic conditions and land that is difficult to reproduce elsewhere. This generates a comparative advantage in wine production.
6.There are some shops in Japan that sell Japanese goods imported back from the United
States at a discount over the prices charged by other Japanese shops. How is this possible?
The Japanese producers employ price discrimination across United States and Japanese
markets, so that the goods sold in the United States are much cheaper than those sold in Japan. It may be profitable for other Japanese to purchase these goods in the United States, incur any tariffs and transportation costs, and resell the goods in Japan. Clearly, the price differential across markets may lead to such profitable chance.
2
7.
Consider a situation similar to that in Figure 6-9, in which two countries that can produce a good are subject to forward-falling supply curves. In this case, however, suppose that the two countries have the same costs, so that their supply curves are identical.
a.What would you expect to be the pattern of international specialization and trade?
What would determine who produces the good?
P,CP,CExternal Economics and SpecializationExternal Economics and Specialization
ACACDQACACD
Q
Suppose two countries that can produce a good are subject to forward-falling supply curves and are identical countries with identical curves. If one country starts out as a producer of a good, i.e. it has a head start even as a matter of historical accident, then all production will occur in that particular country and it will export to the rest of the world.b.What are the benefits of international trade in this case? Do they accrue only to the
country that gets the industry?
Consumers in both countries will pay a lower price for this good when external
economies are maximized through trade and all production is located in a single market. In the present example, no single country has a natural cost advantage or is worse off than it would be under autarky.
8.It is fairly common for an industrial cluster to break up and for production to move to
locations with lower wages when the technology of the industry is no longer rapidly improving—when it is no longer essential to have the absolutely most modern machinery, when the need for highly skilled workers has declined, and when being at the cutting edge of innovation conveys only a small advantage. Explain this tendency of industrial clusters to break up in terms of the theory of external economies.
External economies are important for firms as technology changes rapidly and as the
“cutting edge” moves quickly with frequent innovations. As this process slows, manufacturing becomes more normal and standard and there is less advantage brought by external economies. Instead, firms look for low cost production locations. Since external economies are no longer important, firms find little advantage in being clustered and it is likely that low-wage locations will be chosen.
chapter 8
1.The import demand equation, MD, is found by subtracting the home supply equation from the home demand equation. This results in MD = 80 - 40 x P. Without trade, domestic prices
3
and quantities adjust such that import demand is zero. Thus, the price in the absence of trade is 2.2.a.Foreign's export supply curve, XS, is XS = -40 + 40 x P. In the absence of trade, the price is 1.
b.When trade occurs export supply is equal to import demand, XS = MD. Thus, using the
equations from problems 1 and 2a, P = 1.50, and the volume of trade is 20.
3.a.The new MD curve is 80 - 40 x (P+t) where t is the specific tariff rate, equal to 0.5. (Note: in solving these problems you should be careful about whether a specific tariff or ad valorem tariff is imposed. With an ad valorem tariff, the MD equation would be expressed as MD=80-40 x(1+t)P). The equation for the export supply curve by the foreign country is unchanged. Solving, we find that the world price is $1.25, and thus the internal price at home is $1.75. The volume of trade has been reduced to 10, and the total demand for wheat at home has fallen to 65 (from the free trade level of 70). The total demand for wheat in Foreign has gone up from 50 to 55.
b.and c. The welfare of the home country is best studied using the combined numerical and
graphical solutions presented below in Figure 8-1.
PriceHome SupplyPT=1.75PW=1.50PT*=1.25abcedHome Demand50556070Quantitywhere the areas in the figure are:
a: 55(1.75-1.50) -.5(55-50)(1.75-1.50)=13.125b: .5(55-50)(1.75-1.50)=0.625c: (65-55)(1.75-1.50)=2.50d: .5(70-65)(1.75-1.50)=0.625e: (65-55)(1.50-1.25)=2.50
Consumer surplus change: -(a+b+c+d)=-16.875. Producer surplus change: a=13.125. Government revenue change: c+e=5. Efficiency losses b+d are exceeded by terms of trade gain e. [Note: in the calculations for the a, b, and d areas a figure of .5 shows up. This is because we are measuring the area of a triangle, which is one-half of the area of the rectangle defined by the product of the horizontal and vertical sides.]4. Using the same solution methodology as in problem 3, when the home country is very small relative to the foreign country, its effects on the terms of trade are expected to be much less. The small country is much more likely to be hurt by its imposition of a tariff. Indeed, this intuition is shown in this problem. The free trade equilibrium is now at the price $1.09 and the trade volume is now $36.40.
With the imposition of a tariff of 0.5 by Home, the new world price is $1.045, the internal home
4
price is $1.545, home demand is 69.10 units, home supply is 50.90 and the volume of trade is 18.20. When Home is relatively small, the effect of a tariff on world price is smaller than when Home is relatively large. When Foreign and Home were closer in size, a tariff of .5 by home lowered world price by 25 percent, whereas in this case the same tariff lowers world price by about 5 percent. The internal Home price is now closer to the free trade price plus t than when Home was relatively large. In this case, the government revenues from the tariff equal 9.10, the consumer surplus loss is 33.51, and the producer surplus gain is 21.089. The distortionary losses associated with the tariff (areas b+d) sum to 4.14 and the terms of trade gain (e) is 0.819. Clearly, in this small country example the distortionary losses from the tariff swamp the terms of trade gains. The general lesson is the smaller the economy, the larger the losses from a tariff since the terms of trade gains are smaller.5. The effective rate of protection takes into consideration the costs of imported intermediate goods. In this example, half of the cost of an aircraft represents components purchased from other countries. Without the subsidy the aircraft would cost $60 million. The European value added to the aircraft is $30 million. The subsidy cuts the cost of the value added to purchasers of the airplane to $20 million. Thus, the effective rate of protection is (30 - 20)/20 = 50%.6. We first use the foreign export supply and domestic import demand curves to determine the new world price. The foreign supply of exports curve, with a foreign subsidy of 50 percent per unit, becomes XS = -40 + 40(1+0.5) x P. The equilibrium world price is 1.2 and the internal foreign price is 1.8. The volume of trade is 32. The foreign demand and supply curves are used to determine the costs and benefits of the subsidy. Construct a diagram similar to that in the text and calculate the area of the various polygons. The government must provide (1.8 - 1.2) x 32 = 19.2 units of output to support the subsidy. Foreign producers surplus rises due to the subsidy by the amount of 15.3 units of output. Foreign consumers surplus falls due to the higher price by 7.5 units of the good. Thus, the net loss to Foreign due to the subsidy is 7.5 + 19.2 - 15.3 = 11.4 units of output. Home consumers and producers face an internal price of 1.2 as a result of the subsidy. Home consumers surplus rises by 70 x .3 + .5 (6 x.3) = 21.9 while Home producers surplus falls by 44 x .3 + .5(6 x .3) = 14.1, for a net gain of 7.8 units of output.7. At a price of $10 per bag of peanuts, Acirema imports 200 bags of peanuts. A quota limiting the import of peanuts to 50 bags has the following effects:a.The price of peanuts rises to $20 per bag.b. The quota rents are ($20 - $10) x 50 = $500.
c. The consumption distortion loss is .5 x 100 bags x $10 per bag = $500.d. The production distortion loss is .5 x 50 bags x $10 per bag = $250.
5
因篇幅问题不能全部显示，请点此查看更多更全内容