Please answer the question fully with reasoning, thank you! 8. Consider two coun
ID: 1121337 • Letter: P
Question
Please answer the question fully with reasoning, thank you!
8. Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each firm produces high-speed trains for both domestic consumption and exporting. The high-tech firms in both countries have been operating businesses for decades without subsidy. However, they plan to produce a new model of high-speed train, and this new model requires a large amount of fixed cost, which is equivalent to 20 times of marginal cost. Each firm has asked its government to provide subsidy, which is amount to half of the fixed cost. Do you think the government should provide subsidy? Explain your reasoning.
Explanation / Answer
Yes, the government should provide susidy . because, by providing subsidy , he enables the country to developed nation. we know that , the main prospect for a developing nation to improve and increase the infrastructure of the country to move to the developed nation from developing. so, when the high-speed train is produce , then the welfare of country should increase with the increase in infrastructure.