Assignment Task:
International Production: You have two factories that produce identical products (let's say plastic forks). The plants and equipment are fully depreciated and there are no fixed costs. Note, this is a competitive market. As a result, your cost basis in the USA is TCusa = 80Yusa"2, your cost basis in CHINA is TCchina = 48Ychina®2. The demand for plastic forks is Y=1488. Note: The production then becomes Y = Yusa + Ychina = 1488
a. With no restrictions (competitive markets exist) how many plastic forks will the USA produce?
b. How much would China need to lower their cost to produce all of the 1488 plastic forks?
c. How much of a subsidy would the firm need to produce all 1488 plastic forks in the USA, given the original TC functions?