It is assumed that there are 2 countries that are producing cars: country A and country B. The fixed cost

for each firm in producing cars = $5 billion and the variable costs = $17,000/car. In each country, price

function (P) = 20,000 + 225/n (n = the total firms). Cars produced in country A = 160 million units and in

country B = 284.5 million units. Answer these questions:

(i) How many firms are producing cars before and after trading between the two countries?

(ii) Identify the prices: before and after trade

(iii) Explain the gains from trade