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Author Question: The figure above represents the demand and cost functions facing a Brazilian Steel producing ... (Read 79 times)

jasdeep_brar

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on: Jun 30, 2018
The figure above represents the demand and cost functions facing a Brazilian Steel producing monopolist. The Brazilian firm is charging its foreign (U.S.) customers one half the price it is charging its domestic customers.
 
  Is this good or bad for the real income or economic welfare of the United States? Is the Brazilian firm engaged in dumping? Is this predatory behavior on the part of the Brazilian steel company?

Question 2

What is a pollution haven?
 
  What will be an ideal response?


ebenov

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Reply #1 on: Jun 30, 2018
Answer to Question 1

It is good for U.S. customers.Yes, this is dumping if you define dumping as selling abroad at a price lower than domestically. No, it is not dumping if by dumping you mean selling below marginal cost. No, this is not predatory, since it is not being done in order to capture market share, but rather is mere static profit maximization behavior, as is expected of any self-respecting monopolist.

Answer to Question 2

A pollution haven is a country with relatively lax environmental standards or enforcement. In effect, countries with strict standards export activities that pose high environmental risks to countries that are willing to accept the risks.


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jasdeep_brar

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Reply #2 on: Jun 30, 2018
Thank you :)


ebenov

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Reply #3 on: Jun 30, 2018
Happy to help you


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