7. Consider a small country where Goofy Gadgets, Inc. is the only firm licensed to produce gadgets. By government decree, gadgets cannot be imported or exported. The government allows Goofy Gadgets to operate only two plants. Those plants have the following cost functions: TCA =q12 TCB = 4032 = Demand for gadgets in this country is given by the following demand function: Q = 104 - 2P a How many gadgets will GGI produce, and how will GGI divide production between the two plants? What will be the market price of gadgets? How much profit will GGI earn? b. Now, suppose the government relaxes its trade restrictions so that GGI can export gadgets, but importing gadgets is still strictly prohibited. GGI is a small producer relative to the world market and therefore, acts as a price-taker when it exports gadgets. The world price is 40. GGI is still a monopolist in the domestic market. Moreover, because others cannot sell in the domestic market, GGI can sell domestically at a price different from the world price. How many gadgets will GGI produce, and how will GGI divide production between the two plants? How many gadgets will GGI sell domestically and how many will be exported? What prices will GGI charge in each market? How much profit will GGI earn? [Hint: Separate from the domestic market, what do the demand and marginal revenue curves look like on the world market? 7. Consider a small country where Goofy Gadgets, Inc. is the only firm licensed to produce gadgets. By government decree, gadgets cannot be imported or exported. The government allows Goofy Gadgets to operate only two plants. Those plants have the following cost functions: TCA =q12 TCB = 4032 = Demand for gadgets in this country is given by the following demand function: Q = 104 - 2P a How many gadgets will GGI produce, and how will GGI divide production between the two plants? What will be the market price of gadgets? How much profit will GGI earn? b. Now, suppose the government relaxes its trade restrictions so that GGI can export gadgets, but importing gadgets is still strictly prohibited. GGI is a small producer relative to the world market and therefore, acts as a price-taker when it exports gadgets. The world price is 40. GGI is still a monopolist in the domestic market. Moreover, because others cannot sell in the domestic market, GGI can sell domestically at a price different from the world price. How many gadgets will GGI produce, and how will GGI divide production between the two plants? How many gadgets will GGI sell domestically and how many will be exported? What prices will GGI charge in each market? How much profit will GGI earn? [Hint: Separate from the domestic market, what do the demand and marginal revenue curves look like on the world market