Problem Set _4b - Econ 181 International Trade Spring 2009...

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Econ 181: International Trade Spring 2009 Problem Set #4b (Due Tuesday, April 7, 2009) 1. Article Analysis—Intra-industry Trade: Read this article and answer the following questions. Sabra Chartrand, “Stepping Up the Pressure Against Piracy in China”. The New York Times, December 6, 2004. The URL is: http://www.nytimes.com/2004/12/06/business/businessspecial2/06patents.html?scp=3&sq= %22Stepping%20up%20the%20Pressure%22&st=cse a. Why is piracy an issue that is relevant for intra-industry trade? b. How is piracy affecting international trade? c. Could the amount of piracy in China be related to the lack of price discrimination? d. The president of the International Intellectual Property Alliance states that "[a] CD costs 15 cents to produce." If that is true then why do CDs cost upwards of 100 times that in retail markets? 2. Model Analysis—Imperfect Competition. Suppose the widget industry operates in the home country such that each firm’s sales of widgets is given by: X = S [ 1/n – b(P – P*)]
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