Question IV (External economies of scale, Suppose that wine industry has very strong external increasing return to scales (IRS). France is the only country producing wine now, and France's average production cost of producing wine reflecting its external IRS can be written as ACF (x) The global demand of wine can be written as = D = 20 - 10x. ACK (x) 20 1 + x Assume that Korea's average cost of producing wine is written as 2 1 + x = If a Korean firm starts producing wine, what would be the global wine consumption in the equi- librium? Use a diagram to explain your answer. Your diagram should include the values for y- or x- axes, and intersection point (s) if needed.
Question IV (External economies of scale, Suppose that wine industry has very strong external increasing return to scales (IRS). France is the only country producing wine now, and France's average production cost of producing wine reflecting its external IRS can be written as ACF (x) The global demand of wine can be written as = D = 20 - 10x. ACK (x) 20 1 + x Assume that Korea's average cost of producing wine is written as 2 1 + x = If a Korean firm starts producing wine, what would be the global wine consumption in the equi- librium? Use a diagram to explain your answer. Your diagram should include the values for y- or x- axes, and intersection point (s) if needed.
Chapter1: Making Economics Decisions
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Transcribed Image Text:Question IV (External economies of scale,
strong external increasing return to scales (IRS). France is the only country producing wine now,
and France's average production cost of producing wine reflecting its external IRS can be written
Suppose that wine industry has very
as
20
ACF (x) =
1+ x
The global demand of wine can be written as
D%3D 20 - 10х.
Assume that Korea's average cost of producing wine is written as
АСк (х)
1+ x
If a Korean firm starts producing wine, what would be the global wine consumption in the equi-
librium? Use a diagram to explain your answer. Your diagram should include the values for y- or
x- axes, and intersection point(s) if needed.
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