(Solved): Consider the response of firms in a world with two identical countries (Home and Foreign). Assume t ...

Consider the response of firms in a world with two identical countries (Home and Foreign). Assume that a firm must incur an additional cost \( t \) for each unit of cutput that it sells to customers across the border. Consider the decisions of firms 1 and 2 (with marginal costs \( c_{1} \) and \( c_{2} \) ) in the figures below. Fim 2 cannot profitably operats A. Firm 2 can ptofiably osterale in both the domestic and the export markets. B. in the export market only. C. in its domestic market only. D. in either of the domestic or the export markets. In the figure to the right, the importing country imposes a tariff that raises the domestic prico from \( \$ 8 \) to \( \$ 12 \) but lowers the foreign export price from \( \$ 8 \) to \( \$ 4 \). As a result of this tariff, producers in the importing country A. experience a wollare gain valued at \( \$ 18 \). B. experience a welfare gain valued at \( \$ 12 \). C. experience a welfare gain valued at \( \$ 34 \). D. experience a weltare gain valued at \( \$ 16 \).