3. Reproduce the numerical example from the chapter on Monopolistic Competition in the book by Krugman & Obstfeld. If you do not have the book, here is the relevant information (the model and the equations are the same as those in the slides). Consider two countries, Home y Foreign, with the following market sizes: Sí = 900,000 and SF = 1,600,000. The demand function for industry iis represented by Qi (P; – P) In 30,000 While the total cost function is represented by TC = 750,000,000 + 5,000 ·Q (a) Compute the long-run equilibrium price and the long-run number of varieties in Home and in Foreign under AUTARKY. (b) Compute the long-run equilibrium price and the long-run number of varieties in the integrated market when there is FREE TRADE. Compare (a) and (b) and show that both countries are better off. 4. Suppose that the two countries that we considered in the numerical example of the previous exercise were to integrate their automobile market with a third country, the third country having an annual market of 3.75 million automobiles. Find the number of firms the production per firm and the price per automobile in the new integrated market post trade.

3. Reproduce the numerical example from the chapter on Monopolistic Competition in the book by Krugman & Obstfeld. If you do not have the book, here is the relevant information (the model and the equations are the same as those in the slides). Consider two countries, Home y Foreign, with the following market sizes: Sí = 900,000 and SF = 1,600,000. The demand function for industry iis represented by Qi (P; – P) In 30,000 While the total cost function is represented by TC = 750,000,000 + 5,000 ·Q (a) Compute the long-run equilibrium price and the long-run number of varieties in Home and in Foreign under AUTARKY. (b) Compute the long-run equilibrium price and the long-run number of varieties in the integrated market when there is FREE TRADE. Compare (a) and (b) and show that both countries are better off. 4. Suppose that the two countries that we considered in the numerical example of the previous exercise were to integrate their automobile market with a third country, the third country having an annual market of 3.75 million automobiles. Find the number of firms the production per firm and the price per automobile in the new integrated market post trade.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Question #4 is where I need help but Question #3 has relevant information

3. Reproduce the numerical example from the chapter on Monopolistic Competition in the book
by Krugman & Obstfeld. If you do not have the book, here is the relevant information (the
model and the equations are the same as those in the slides). Consider two countries, Home y
Foreign, with the following market sizes: Sí = 900,000 and SF = 1,600,000. The demand
function for industry iis represented by
Qi
(P; – P)
In
30,000
While the total cost function is represented by
TC = 750,000,000 + 5,000 ·Q
(a) Compute the long-run equilibrium price and the long-run number of varieties in Home and
in Foreign under AUTARKY.
(b) Compute the long-run equilibrium price and the long-run number of varieties in the
integrated market when there is FREE TRADE.
Compare (a) and (b) and show that both countries are better off.
4. Suppose that the two countries that we considered in the numerical example of the previous
exercise were to integrate their automobile market with a third country, the third country
having an annual market of 3.75 million automobiles. Find the number of firms the production
per firm and the price per automobile in the new integrated market post trade.

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