1. Suppose a perfectly competitive rm has marginal and total costs given by MT? = 3 + 2.3: and TC = 2 + 3:; + :12. respectively. where q is the quantity of output produced by the rm. In a monetary union the rm faces a constant price p1 = 9 for its product. Outside of the monetary union 1with a exible exchange rate it faces a 50-50 chance of 332 = 11 or 103 = 7. The rm decides on the prot maximizing quantity q by setting 39 : M'C which maximizes its prot arr : (p a q} TC. (a) What are the rm's prot maximizing quantity, price and prot in a monetary union? (b) 1What is the average prot with a exible exchange rate? (c) Does more exchange rate certainty in a monetary union lead to higher prots for the rm? 2. Identify and briey describe three main benets associated with monetary unions