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Please use the second screenshot to answer the question directly below: [Trade Protectionist Question) Suppose the government imposes a no: tariffso that t=0. What will
Please use the second screenshot to answer the question directly below:
[Trade Protectionist Question) Suppose the government imposes a no: tariffso that t=0. What will be the equilibrium output and the profit for each rm? (Round each answer to two decimal places. for example 10.32. Also: do not use dollar signs or commas in the prot calculation. For example: 26?5). 0.1 = Q * Firm 1 Prot: Firm 2 Pro t= Trade protectionism has always been a contentious political issue. and goes all the way back to Alexander Hamilton's argument for protecting "infant industries". Let's examine how such a trade protectionist policy may work: Suppose there are two rms. Firm 1 and Firm 2. and that the demand curve in the industry is given by 1' =120 Q 1 Q,? . If Firm 1 is the "experienced foreign rm" and Firm 2 is the "inexperienced infant rm". the argument goes that the experienced foreign firm will have had enough time to achieve lower costs of production. Hence. protecting the infant industry would amount to imposing a tariff of the foreign firm. which essentially increases that firm's costs in orderto make the infant industry more competitive. To that end. supposethat '1'('(Q1) = (2+ 1') Q1 and H." ( Qq] : 4Q" Notice thatwhen there is no tariff (t=l)). Firm 1 does in fact operate at lower costs than Firm 2. Let's analyze this scenario by beginning to solve for each rm's best response function. In this case. we have that MR1=1207 21217 Q\"! MC'1=2+I and MR=1207 ("'17 2Q,3 MC\": 4 Solve for each firm's best response. 0 98 r 1 are]: ()1: 2 _302 1 8R2: (22:437 E Q1 CI 1 HR]:Q_1=118EQ2 1 8R2.Q_2_113 3 GI [:18R1:()_1=48 Q" are\": 0543 Q1 (9 are]: ()1: 118: Q" 2 2 0.1 are": (2553 A A 2Step by Step Solution
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