Empirically Analyzing the Impacts of U.S. Export Credit Programs on U.S. Agricultural Export Competitiveness

problem derive the short-run supply function of a competitive firm in the exporting
country. Suppose that the firm produces a single output, namely good y, by using two
inputs x₁ and x₂ , and suppose that its short-run variable cost of the firm is defined as¹⁶:

(10)       C(y) = By²

Additionally, let G be the short run fixed cost of the firm. The profit
maximization of the firm can be formulated as:

(11)      Maxy{Π(y)=Py-C(y)-G}

Where C(y)= By² and P is the output price.

Applying standard profit maximization approach and applying Hotelling’s lemma, the

short-run supply function of the firm can be obtained as,

(iii) The Import Demands of the Importing Country in the Absence and Presence
of Secondary Benefits from an Export Credit Program

As a price taker, the absence or presence of secondary benefits from an export
credit program offered by the exporting country to the consumer in the importing country
does not affect the production cost. Thus, when trade opens up, in the absence or
presence of secondary benefits from an export credit program, the short-run supply
function of the firm in the importing country is the same as its short-run supply prior to
trade recorded in equation 11.

¹⁶ Rienstra-Munnicha (2004) applied two-input-model of cost minimization to derive the short-run variable
cost of the firm as C (y ) = By². Where γ = 1∕(α + β) and both α and β are the parameters of the
production function. He further explained that it is reasonable to assume that γ = 2 .

20

<<   17   18   19   20   21   22   23   >>

More intriguing information