Suppose that only one firm, Big Foot, sells footballs in the country and international trade of footballs including both exporting and importing is prohibited by government due to Big Foot’s successful lobby. The following equations indicates Big Foot’s market demand and total cost: • Demand: P = 5-0.5Q • Total Cost: TC = 1.5 + 0.5Q + 0.25 Q2 where Q is quantity (in 1000) and P is the price measured in dollars. (i) Determine how many footballs Big Foot chooses to produce, the price it will set for its product and its expected profit. Illustrate your analysis with a proper market diagram. (ii) Evaluate the size of deadweight loss cause by monopoly status of Big Foot. Suppose that the parliament passed a new law that not only allows everyone to sell footballs but also opens international trade of footballs. Suppose further that the market demand in the country remains the same while the price of football in the competitive global market is $3 including shipping and importation fee. Analyse whether the country will import or export footballs after the deregulation. Predict the changes in Big Foot’s short-run and long-run profit after the market becomes perfectly competitive.
Suppose that only one firm, Big Foot, sells footballs in the country and international trade of footballs including both exporting and importing is prohibited by government due to Big Foot’s successful lobby. The following equations indicates Big Foot’s market demand and total cost:
• Demand: P = 5-0.5Q
• Total Cost: TC = 1.5 + 0.5Q + 0.25 Q2
where Q is quantity (in 1000) and P is the price measured in dollars.
(i) Determine how many footballs Big Foot chooses to produce, the price it will set for its product and its expected profit. Illustrate your analysis with a proper
market diagram.
(ii) Evaluate the size of
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