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Consider the wine industry in the Home country, and suppose that fixed costs for a company in the wine industry are $150,000 and the variable
Consider the wine industry in the Home country, and suppose that fixed costs for a company in the wine industry are $150,000 and the variable costs are equal to $20 per case of wine (ie, marginal cost per unit = $20). Because more companies increase competition in the market, the market price falls as more companies enter the market, or specifically, P=20+ 1500, where n is the number of companies in a market, and p is the price. Assume that initially the wine industry at Home is completely open to free trade and that the total size of wine market is equal to 360,000 cases. a. (10 points) How many wine companies will operate in the wine industry? What is the equilibrium price of wine? Paragraph Path:p b. (6 points) Suppose now that the market size decreased from 360,000 to 250,000 cases (let's say because trade barriers between the Home country and another country are erected). How many wine companies will operate in the wine industry? What is the new equilibrium price of wine
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