Suppose the car market is characterized by monopolistic competition. As an advisor for a car company in Germany thinks about whether to export cars to Japan. For any car brand in Japan, the demand curve is Q = 5000 - 20P, the constant unit cost of cars for the company you are advising is $200.

a) Imagine that the trade cost per car exported from Germany to Japan is $100, explain why you would suggest the company not to export cars to Japan.

b) Imagine that the trade cost per car is between $100 to $20. Would your advice from part (a) change? What price would you suggest the company set in the Japanese market?