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Globalization discussion questions

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1. (Requires calculus) In the model of a dominant firm, assume that the fringe supply curve is given by Q = -1 + 0.2P, where P is market price and Q is output. Demand is given by Q = 11 - P.
What will price and output be if there is no dominant firm? Now assume that there is a dominant firm, whose marginal cost is constant at $6. Derive the residual demand curve that it faces and calculate its profit-maximizing output and price.

10. A selfless person approaches Jones and Smith with a $100 bill and offers to sell it to the highest bidder, but both the winning and losing bidders must pay her their bids. So if Jones bids $2 and Smith bids $1 they pay a total of $3, but Jones gets the money, leaving him with a net gain of $98 and Smith with -$1. If both bid the same amount, the $100 is split evenly between them. Assume that each of them has only two $1 bills on hand, leaving three possible bids: $0, $1, or $2. Write out the payoff matrix for this game, and then find its Nash equilibrium.

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Solution Summary

The model of a dominant firm for a fringe supple curve is examined. The residual demand curve that it faces is derived.

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Five Business Management essay questions on global strategies


1. For the past eight years the Kellogg Company has struggled to get permission to put the same vitamins in all its European corn flakes. In theory, Europe completed building a unified market in 1993 with the birth of the European Union, but so far it has not applied to vitamins in cereals.

Denmark doesn't want vitamins added, fearing that cereal eaters who already take multivitamins might exceed recommended daily doses, which some experts say can damage internal organs. The Netherlands officials don't believe either Vitamin D or folic acid is beneficial, so it doesn't want them added. Finland likes more Vitamin D than other countries to help Finns make up for sun deprivation. And the list goes on.

Which major facet [component] of the globalization definition is Kellogg
trying to implement? Explain.

2. Not long ago the World Trade Organization [WTO] told China that it could no longer force providers of American books, music and films to distribute their goods through a local [Chinese government run] "partner." Foreign companies saw the Chinese rule as an impediment to reaching a broad Chinese audience with their products. The Chinese market is flooded with pirated CD's and DVD's whose creators receive no compensation.

In the midst of the global recession, China took steps to protect its industries.
It gave tax rebates to exporters and barred government entities from buying
foreign goods if there were domestic substitutes available.

While the WTO has ruled several times against China in recent years, China is
also turning to the WTO to defend its interests. It challenged for example an
American ban on Chinese poultry imports.

What do these trade developments tell you about globalization and the role of the WTO?

3. You are an American traveling on business in Egypt. You have a 9am business meeting appointment, but your Egyptian counterpart does not show up until 10am, and does not apologize. Explain why this behavior is apparently acceptable in Egypt. Would it be acceptable behavior in the United States? Why or why not?

4. The United States and other western countries have been trying to deal with what many call "Chinese currency manipulation" for years. This is the process where the Chinese government pegs their currency to stay positioned "below" the value of the U.S. dollar.

Setting politics aside, why is the United States Congress again turning up
the heat on this issue, and pushing the Administration "to do something"?
Why has China been intervening [which they deny] "in currency markets
to halt the rise of their currency, against the value of foreign currencies?

5. True or false - price discrimination is unethical and illegal. Explain your answer.

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