Answered: Only one firm produces and sells soccer…

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

Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost:

Demand:	P=15−QP=15−Q
Marginal Revenue:	MR=15−2QMR=15−2Q
Total Cost:	TC=3+Q+0.5Q2TC=3+Q+0.5Q2
Marginal Cost:	MC=3+QMC=3+Q

where QQ is quantity and PP is the price measured in Wiknamian dollars.

The monopolist produces ( ? ) soccer balls and sells them at a price of ($)

each. The monopolist's profit is ($) in this case.

One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market.

The domestic production of soccer balls will ( rise or fall ) ? to ( ? ) soccer balls, and domestic consumption will ( rise or fall ) to ( ? ) soccer balls. Therefore, Wiknam will ( export , or import ) soccer balls in this case.

In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price.

In this case, the price without trade is ( higher or lower ) ? than the world price, and the country is an ( ? ) . This is because the claim made in Chapter 9 assumed the domestic market was ( ? ) .

Suppose that the world price was not $10 but, instead, happened to be exactly the same as the domestic, monopolistic price without trade.

Allowing trade in this case would result in the country (?) soccer balls.

Marginal Cost:
MC = 3+Q
where Q is quantity and P is the price measured in Wiknamian dollars.
The monopolist produces
soccer balls and sells them at a price of $
each. The monopolist's profit is $
in this case.
One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports-of soccer balls at the world price of $10. The
firm is now a price taker in a competitive market.
The domestic production of soccer balls will
to
soccer balls, and domestic consumption will
to
soccer balls.
Therefore, Wiknam will
soccer balls in this case.
In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an
importer when the price without trade is above the world price.
This is because the claim made in
v than the world price, and the country is an
In this case, the price without trade is
Chapter 9 assumed the domestic market was
Suppose that the world price was not $10 but, instead, happened to be exactly the same as the domestic, monopolistic price without trade.
soccer balls.
Allowing trade in this case would result in the country

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