The following information relates to a product produced by Faulkland Company: Direct materials $ 10 Direct labor 7 Variable overhead 6 Fixed overhead 8 Unit cost $ 31 Fixed selling costs are $1,000,000 per year. Variable selling costs of $4 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Faulkland expects to produce only 400,000 units next year. The product normally sells for $40 each. A customer has offered to buy 60,000 units for $30 each. The customer will pay the transportation company directly for the transportation charges on the units purchased. If Faulkland accepts the special order, the effect on operating profits would be a:

Suppose that fixed costs for a firm in the automobile industry (start-up costs of factories, capital equipment, and so on) are $5 billion and that variable costs are equal to $17,000 per finished automobile. because more firms increase competition in the market, the market price falls as more firms enter an automobile market, or specifically, , where n represents the number of firms in a market. assume that the initial size of the u. s. and the european automobile markets are 300 million and 533 million people, respectively. a. calculate the equilibrium number of firms in the u. s. and european automobile markets without trade. b. what is the equilibrium price of automobiles in the united states and europe if the automobile industry is closed to foreign trade? c. now suppose that the united states decides on free trade in automobiles with europe. the trade agreement with the europeans adds 533 million consumers to the automobile market, in addition to the 300 million in the united states. how many automobile firms will there be in the united states and europe combined? what will be the new equilibrium price of automobiles? d. why are prices in the united states different in (c) and (b)? are consumers better off with free trade? in what ways?