5. Choice between direct exporting and FDIDas Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. Theaverage cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or inRussia.COST (Dollars per puzzle)110AC01020 30 40 50QUANTITY (Thousands of puzzles)60 708090100?Suppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000puzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.)$Based on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $per puzzle, and produce the total of 30,000 puzzles at $per puzzle, produce 10,000 puzzles atper puzzle.Complete the following table by indicating Das Spielzeug's total production cost for each scenario.ScenarioProduce 10,000 puzzles in Germany and 20,000 puzzles in Russia.Produce 30,000 puzzles at the same factory.Total Production Cost(Dollars)Now suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $2.00 pertransported puzzle.If Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is$If Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is$Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's bestproduction strategy?Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia.Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia.Produce 30,000 puzzles in either Germany or Russia.Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany.

Average cost is the cost of each unit of production of a product. It provides producer with a clear…

5. Choice between direct exporting and FDI Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in Russia. COST (Dollars per puzzle) 2 10 9 AC ° ° 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of puzzles) Suppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000 puzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.) Based on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $ per puzzle, and produce the total of 30,000 puzzles at $ per puzzle. per puzzle, produce 10,000 puzzles at Complete the following table by indicating Das Spielzeug's total production cost for each scenario. Scenario Total Production Cost (Dollars) Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles at the same factory. Now suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $2.00 per transported puzzle. If Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is $ If Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best production strategy? Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia. Produce 30,000 puzzles in either Germany or Russia. Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany.

5. Choice between direct exporting and FDI Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in Russia. COST (Dollars per puzzle) 2 10 9 AC ° ° 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of puzzles) Suppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000 puzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.) Based on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $ per puzzle, and produce the total of 30,000 puzzles at $ per puzzle. per puzzle, produce 10,000 puzzles at Complete the following table by indicating Das Spielzeug's total production cost for each scenario. Scenario Total Production Cost (Dollars) Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles at the same factory. Now suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $2.00 per transported puzzle. If Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is $ If Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best production strategy? Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia. Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia. Produce 30,000 puzzles in either Germany or Russia. Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

5. Choice between direct exporting and FDI
Das Spielzeug is a profit-maximizing firm producing puzzles, which it can produce and sell in its home country, Germany, and abroad in Russia. The
average cost (AC) curve on the following graph represents Das Spielzeug's cost of producing puzzles within one factory, whether in Germany or in
Russia.
COST (Dollars per puzzle)
1
10
AC
0
10
20 30 40 50
QUANTITY (Thousands of puzzles)
60 70
80
90
100
?
Suppose that at the current market price of puzzles, the demand for Das Spielzeug's product is 10,000 puzzles per year in Germany and 20,000
puzzles per year in Russia. (Hint: Select each point on the previous graph to see its coordinates.)
$
Based on Das Spielzeug's average cost curve, within one factory it can produce 20,000 puzzles at $
per puzzle, and produce the total of 30,000 puzzles at $
per puzzle, produce 10,000 puzzles at
per puzzle.
Complete the following table by indicating Das Spielzeug's total production cost for each scenario.
Scenario
Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia.
Produce 30,000 puzzles at the same factory.
Total Production Cost
(Dollars)
Now suppose that if Das Spielzeug produces puzzles in one country and sells them in the other, it incurs an additional shipping cost equal to $2.00 per
transported puzzle.
If Das Spielzeug produces 30,000 puzzles in Germany and transports 20,000 of them to Russia, its total cost of production and shipping is
$
If Das Spielzeug produces 30,000 puzzles in Russia and transports 10,000 of them to Germany, its total cost of production and shipping is
$
Based on Das Spielzeug's production and shipping costs determined in the previous questions, which of the following is Das Spielzeug's best
production strategy?
Produce 10,000 puzzles in Germany and 20,000 puzzles in Russia.
Produce 30,000 puzzles in Germany and ship 20,000 puzzles to Russia.
Produce 30,000 puzzles in either Germany or Russia.
Produce 30,000 puzzles in Russia and ship 10,000 puzzles to Germany.

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