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Unformatted text preview: &nd the Cournot (Nash) equilibrium. Let q & V ( s ) ; q & T ( s ) denote those equilibrium choices. How does this subsidy a/ect outputs and the equilbrium market price? (iii) Assume Volkswagen is entirely owned by German shareholders. Also Angela Merkel can use lump sum taxation to recover the production subsidy. The surplus accruing to the German nation is then & V = [1 & q & V ( s ) & q & T ( s )] q & V ( s ) : Show this surplus is increasing in s; while Toyota±s surplus is decreasing in s: How might this explain why EU trading rules restrict individual governments from subsidising companies in their own countries? 1...
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This note was uploaded on 12/31/2011 for the course ECON MR 102 taught by Professor Huyduong during the Winter '11 term at RMIT Vietnam.
- Winter '11