1. Only one firm produces and sells soccer balls in the country of Ulke, and as the story begins, international trade in soccer balls is prohibited. Given the following equations, where Q is quantity, and P is the price measured in Ulkenian dollars:

Demand: P = 10 - Q

Marginal revenue: MR = 10 -2Q

Total Cost: TC = 3 + Q + 0.5 Q2

Marginal Cost: MC = 1 + Q

1. How many soccer balls does the monopolist produce? What price are they sold? What is the maximum amount of profit? Show your work.
2. One day, the King of Ulke decrees that henceforth there will be free trade - either imports or exports - of soccer balls at the world price of $6. The firm is now a price taker in a competitive market. What happens to domestic production of soccer balls? To domestic consumption? Does Ulke export or import soccer balls? Show your work.