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The optimal production levels

Consider the color TV problem considered in the class without constraints. Because the companys
assembly plant is located overseas, the Government has imposed a tariff of $25 per unit.
(a) Find the optimal production levels, taking the tariff into consideration. What does the tariff cost the company? How much of this cost is paid directly to the government, and how much represents lost sales?
(b) Would it be worthwhile for the company to relocate production facilities to the U.S. in order to avoid the tariff? Assume that the overseas facility can be leased to another manufacturer for $200,000 per year and that the cost of constructing and operating a new facility in the U.S. would amount to $550,000 annually. The construction costs have been amortized over the expected life of the new facility.
(c) The purpose of the tariff is to motivate manufacturing companies to operate plants in the U.S. What is the minimum tariff that would make it worthwhile for the company to relocate its facility?
(d) Given that the tariff is large enough to motivate the company to move its facility, how important is the actual tariff amount? Consider the sensitivity of both production levels and profit to the amount of the tariff.

Sample Solution

Monetary Paradigms like unrestricted economy free enterprise, Keynesianism, and Marxism affect the Cold War. Keynesianism is the most un-outrageous of these standards since it advocates for government impedance in the midst of emergency, like downturns. Unrestricted economy private enterprise is the idea of the economy being liberated from government control. The market depends on the necessities of the makers and shoppers. Milton Friedman and Adam Smith two or three trailblazers of the possibility of uncontrolled economies, and the possibility that the economy adjust itself. Smith accepted that the economy didn't should be altered, in light of the fact that organic market represented the progressions with next to no necessary altering. This is something contrary to Marxist Economics, which is the idea that the business sectors should be controlled and arranged. Communist supporters accept that free enterprise is basically a phase in the process expected to arrive at the ultimate objective ofFree enterprise has suggestions a long ways past monetary perspectives. Nations or state run administrations with socialist monetary frameworks have encountered more political uprisings and insurgencies than nations with entrepreneur economies. The Cold War furnishes confirmation of how nations with industrialist economies win above socialist economies. Hong Kong exhibits how financial opportunity prompts more joyful individuals, and blissful individuals ordinarily don't endeavor to oust government frameworks. Free enterprise is a powerful strategy for staying away from administrative disappointment. The United States of America is an illustration of an entrepreneur, majority rule, and somewhat equivalent country on the planet. On the off chance that it's contrasted straightforwardly with the Soviet Union, the United States is a dynamic force to be reckoned with. There are more equivalent open doors for various sorts of individuals. Despite the fact that not every person winds up with the equivalent financial circumstance, individuals basically get an opportunity of accomplishing their objectives on the off chance that they buckle down sufficient in an entrepreneur society. Individuals in the Soviet Union were furious in light of the fact that they were ruined, despite the fact that they accepted they would be taken care of by the public authority. US President Ronald Reagan called for changes to be made with the Soviet Union, "We've focused on that a fundamental component in further developing relations between the United States and the Soviet Union is common liberties and Soviet consistence with global contracts on basic freedoms" (1988). When Mikhail Gorbachev came to control, he started to execute changes to work on the Soviet economy. Regardless of these endeavors, they eventually prompted the breakdown of the Soviet Union. The craving for financial change surfaced from the developing monetary disparity inside the Soviet Union. Abundance became engaged inside the first class, while most of Soviets were enduring; the way of life in the Soviet Union was 33% of the way of life level in America and not exactly 50% of West Germany and France (Johnson and Raynes, 1984, page ii). Low expectations for everyday life by and large ensures turmoil with populaces since individuals are probable unsatisfied with their financial circumstance. The defeat of the Soviet Union is proof of the way that state run administrations are shaky when their favored arrangement of financial matters isn't free enterprise. Private enterprise upholds fairness in countries, since free enterprise upholds equivalent open door the other way around. Private enterprise is reasonable on the grounds that it is frequently went with communist political strategies. Equivalent open doors give more individuals the resources to help themselves. However there might be monetary imbalance in entrepreneur states, there isn't far reaching destitution at similar level as in socialist countries. This is on the grounds that individuals who are sufficiently inspired to support themselves will figure out how to accomplish what they need. Major monetary help is given under socialist state run administrations. Hypothetically this is a gainful strategy, however sensibly it isn't however useful as it very well might be planned to be. Somewhere around 20% of Soviets lived in neediness contrasted with 14% of Americans in 1988 (Fein, 1989). The typical Soviet just needs to commit 6% of their pay to paying rent, while Americans devote 26% of their pay to everyday costs (Fein, 1989). The Soviets reproved the presence of destitution in their country up until Gorbachev's authority, and on second thought asserted that neediness was just welcomed on by private enterprise. The huge number of individuals who were encountering financial difficulties looked for change in the USSR. Regardless of Soviet authorities guaranteeing that the destitution was brought about by lethargy, many accept that neediness was welcomed on by the monetary condition of the USSR. The economy under Gorbachev endured hugely, making more than 20 million individuals carry on with devastated lives (Fein, 1989). The socialist Soviet Union disintegrated soon subsequently. A characterizing element of an industrialist economy is its financial opportunity. The five most monetarily free countries are Hong Kong, Singapore, New Zealand, Switzerland, and Australia as indicated by the Index of Economic Freedom (2018). Hong Kong is a piece of China, yet the main things the Chinese government controls in Hong Kong is unfamiliar relations
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