Q1 Suppose that two countries, initially in autarchy, decide to create a single market for only one product. Demand for this product is given by Q(p) = 21-p in country 1, and by Q(p) = 42 - 2p in country 2. With the creation of the single market for this product, the total demand in the unified market will be given by the horizontal sum of the two demands: Q(p) = (21 − p) + (42 - 2p) = 63 -3p. Assume that there is free entry, all firms in both countries have the same cost function TC(q) = 4 + q, and firms compete in the style of Cournot. Please compute the equilibrium number of firms, the equilibrium price, the consumer surplus, and total profits in autarchy and after the completion of the single market. Interpret the results. You can use any of the formulas from the lecture notes that you need. You don't have to compute everything from the very beginning!

Q1 Suppose that two countries, initially in autarchy, decide to create a single market for only one product. Demand for this product is given by Q(p) = 21-p in country 1, and by Q(p) = 42 - 2p in country 2. With the creation of the single market for this product, the total demand in the unified market will be given by the horizontal sum of the two demands: Q(p) = (21 − p) + (42 - 2p) = 63 -3p. Assume that there is free entry, all firms in both countries have the same cost function TC(q) = 4 + q, and firms compete in the style of Cournot. Please compute the equilibrium number of firms, the equilibrium price, the consumer surplus, and total profits in autarchy and after the completion of the single market. Interpret the results. You can use any of the formulas from the lecture notes that you need. You don't have to compute everything from the very beginning!

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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