hw5_solutions - Econ 4550/6550 International Trade...

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1 Econ 4550/6550 International Trade Assignment 5/Solutions 1. Answer the following questions, using the figure below: (i) The figure above represents the demand and cost functions facing a Brazilian Steel producing monopolist. If it were unable to export, and was constrained by its domestic market, what quantity would it sell at what price? (ii) Now the monopolist discovers that it can export as much as it likes of its steel at the world price of $5/ton. How much steel will the monopolist sell, and at what price? (iii) Given the opportunity to sell at world prices, what is the marginal (opportunity) cost of selling a ton domestically? (iv) How much steel would the firm sell domestically, and at what price? (v) Is the Brazilian firm engaged in dumping? Is this predatory behavior on the part of the Brazilian steel company? Is this pricing strategy good or bad for the U.S. ? [1.5x4 + 2 = 8] Answer: (i) It would sell 5 (million tons) at a price of $8/ton. (ii) It would sell 10 million tons at $5/ton. (iii) $5/ton. (iv) 4 million tons at $10/ton.
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hw5_solutions - Econ 4550/6550 International Trade...

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