Business, 24.02.2020 17:32, arushiverma555

A firm based in Ireland produces and sells bicycles in Ireland and in England. The demand for bicycles in Ireland is given by: P = 280 - Q where P is the Irish price and Q is the quantity sold in Ireland. The demand in England is given by: P* = 400 – Q* where P* is the English price and Q* is the quantity in England. The cost of production in Ireland is Y2 where Y is the quantity produced. The cost of production in England is Z2. The cost of transportation is 20 per unit. There is a fixed cost of 8,000 which is incurred by all the active production sites. For the next 4 questions, assume that the Irish firm produces all the bicycles in the home country and serves the British market via exports only

a. Calculate the equilibrium price of a bicycle in Ireland, respectively in England. Then, calculate the total profit earned by the Irish firm. Now, assume that the firm is considering setting up production in England (while still keeping open the possibility of supplementing the British plant with production exported from the Irish plant). 16. (5 points)
b. Write down the total revenue earned by the Irish multinational. Express this as a function of the quantities produced as exported by the two plants (i. e., Y, Z and X). 17.(5 points)
c. Write down the total cost of production and trade associated with operating the two plants. 18.(10 points)
d. Write down the profit function for the Irish MNC and solve for the equilibrium: a) production in Ireland b) production in England c) exports from the Irish plant to the British plant

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A firm based in Ireland produces and sells bicycles in Ireland and in England. The demand for bicycl...