Answers to Problem Set #3

1. If, as seems likely, there are some kind of economies of scale, either due to internal or external economies, then U.S. computer buyers can gain from the export of computers to Eastern Europe because the expanded production will lower average costs, r esulting in lower prices. If the computer market is perfectly competitive, then U.S. buyers would be hurt by the higher price of computers.

2. See the notes for lecture 3.

David A. Latzko
318 COB
Department of Business and Economics
Wilkes University
Wilkes-Barre, PA 18766
phone: (717) 408-4718
fax: (717) 408-4917
dlatzko@wilkes.edu
wilkes1.wilkes.edu/~dlatzko