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-Q Marginal Revenue: MR = 15-20 Total Cost: Marginal Cost: TC=3+Q+0.50² 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 s 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. each. The monopolist's profit is s The domestic production of soccer balls will to Wiknam will soccer balls in this case. soccer balls, and domestic consumption will to than the world price, and the country is an 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. soccer balls. Therefore, 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. Allowing trade in this case would result in the country soccer balls. This is because the claim made in
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-Q Marginal Revenue: MR = 15-20 Total Cost: Marginal Cost: TC=3+Q+0.50² 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 s 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. each. The monopolist's profit is s The domestic production of soccer balls will to Wiknam will soccer balls in this case. soccer balls, and domestic consumption will to than the world price, and the country is an 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. soccer balls. Therefore, 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. Allowing trade in this case would result in the country soccer balls. This is because the claim made in
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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-Q
Marginal Revenue: MR = 15-20
Total Cost:
Marginal Cost:
TC=3+Q+0.50²
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 s
each. The monopolist's profit is s
The domestic production of soccer balls will to
Wiknam will
soccer balls 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.
soccer balls, and domestic consumption will to
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.
than the world price, and the country is an
soccer balls. Therefore,
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.
Allowing trade in this case would result in the country
soccer balls.
This is because the claim made in
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