Please write a minimum of four pages APA 7
formatted paper
Consider the following information:
Suppose fixed costs for a firm in the automobile
industry (start-up costs of factories, capital equipment, and so on) are $5
billion and that variable costs are equal to $17,000 per finished
automobile.
Because of competitive forces in the market, the
market price falls as more firms enter the automobile market, or specifically, P=17,000+(150/n),
where n represents the number of firms in a market.
Assume that the initial size of the U.S. and the
European automobile markets are 300 million and 533 million people,
respectively.
Now answer the following questions:
Calculate the equilibrium number of firms in the U.S.
and European automobile markets without trade.
What is the equilibrium price of automobiles in the
United States and Europe if the automobile industry is closed to foreign
trade?
Now suppose the United States decides on free
trade in automobiles with Europe. The trade agreement with the Europeans adds
533 million consumers to the automobile market, in addition to the 300 million
in the United States.
How many automobile firms will there be in the
United States and Europe combined?
What will be the new equilibrium price of
automobiles?
Why are prices in the United States different in (c)
and (b)?
Are consumers better off with free trade? In what ways?
(Chapter 8)
NEEDED 8 RFERENCES IN APA FORMAT (at least 4
scholar references