In a Krugman type of autarky environment, one was able to derive two equilibrium conditions. In particular, optimal prices charged by firms can be represented by: where els consumption per variety and is the productivity. At the same time, from free-entry, the average revenue being equal to the average cost can by represented by: 8=4+1 where is the total labor supply and f a fixed cost of production. What should happen to the average firm size in this economy when free-trade is allowed with an identical foreign economy? Average firm size doesn't change. Not enough information to answer. Average firm size increases. Average firm size decreases. 10000
In a Krugman type of autarky environment, one was able to derive two equilibrium conditions. In particular, optimal prices charged by firms can be represented by: where els consumption per variety and is the productivity. At the same time, from free-entry, the average revenue being equal to the average cost can by represented by: 8=4+1 where is the total labor supply and f a fixed cost of production. What should happen to the average firm size in this economy when free-trade is allowed with an identical foreign economy? Average firm size doesn't change. Not enough information to answer. Average firm size increases. Average firm size decreases. 10000
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.3P
Related questions
Question
13
![In a Krugman type of autarky environment, one was able to derive two equilibrium conditions. In particular, optimal prices charged by firms can be represented by:
E= (1+ ve
where cis consumption per variety and p is the productivity. At the same time. from free-entry, the average revenue being equal to the average cost can by represented
by:
where L is the total labor supply and f a fixed cost of production.
What should happen to the average firm size in this economy when free-trade is allowed with an identical foreign economy?
Average firm size doesn't change.
Not enough information to answer.
Average firm size increases.
Average firm size decreases.
lo000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9ac289aa-8f43-42d8-bd7a-345a15ed902c%2F1afdacbe-4c43-461c-96db-fc6fc1d78f0d%2F798c4c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In a Krugman type of autarky environment, one was able to derive two equilibrium conditions. In particular, optimal prices charged by firms can be represented by:
E= (1+ ve
where cis consumption per variety and p is the productivity. At the same time. from free-entry, the average revenue being equal to the average cost can by represented
by:
where L is the total labor supply and f a fixed cost of production.
What should happen to the average firm size in this economy when free-trade is allowed with an identical foreign economy?
Average firm size doesn't change.
Not enough information to answer.
Average firm size increases.
Average firm size decreases.
lo000
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you