9781118041581

find the optimal amounts of both inputs in the long run. Explain the

large differences in inputs, output, and profit between the short run

and the long run.

S2. A multinational firm produces microchips at a home facility and at a

foreign subsidiary according to the respective cost functions:

The firm sells chips in the home market and the foreign market where

the inverse demand curves are

respectively. Here D denotes the quantity soldin each market, and Q

denotes the quantity producedin each facility. Chips can be costlessly

shipped between markets so that DHneed not equal QH(nor DF

PH 300 DH and PF 250 .5DF,

CH120QH and CF50QF.5QF^2.

270 Chapter 6 Cost Analysis

ABC DEF GH

1

2 WORLDWIDE CHIP DECISIONS

3

4 Set Sales & Output Quantities (000s)

5

6 Home Abroad Total

7

8 Sales 10 10 20 Extra

9 0 Output

10 Output 10 10 20

11

12 Price 290 245 45 Price Gap

13

14 Revenues 2,900 2,450 5,350

15 MR 280 240 —

16

17 Costs 1,200 550 1,750

18 MC 120 60 —

19

20 Profit 1,700 1,900 3,600

21

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