1. Suppose there are 2 automobile industries, one at Home and one at Foreign. Home has annual sales of 900,000 cars and Foreign has annual sales of 1.6 million cars. Both countries have the same cost of production: F= $750,000,000, MC=$5000, b=1/30,000. In the absence of trade, Home would have 6 firms, each producing 150,000 cars while Foreign would have 8 firms, each producing 200,000 cars. a. In the absence of trade, calculate the price and the average cost and show the equilibrium level. b. In the absence of trade, calculate the price and the average cost at Foreign and show the equilibrium level c. Now suppose Home and Foreign trade cars with one another. The newly integrated market has total sales of 2.5 million cars and supports 10 firms, each producing 250,000 cars. Calculate the price per car and the average cost and show the new equilibrium level. 2. Suppose a firm sells 1000 units of a good at Home and 100 units abroad. If the domestic price per unit of the good at Home (PH) is $20 and the foreign price (PF) per unit of that good is $15. Suppose to expand sales by 1 extra unit, the market price needs to be reduced by 0.01. a. Calculate the marginal revenue at Home. b. Calculate the marginal revenue at Foreign