Question
Only one rm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited.
Only one rm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P = 10 Q Marginal Revenue: M R = 10 2Q Total Cost: T C = 3 Q .5Q^2 Marginal Cost: M C = 1 Q where Q is the quantity and P is the price measured in Wiknamian dollars. (a) How many soccer balls does the monopolist produce? At what price are they sold? What is the monop- olist's prot? (b) One day, the King of Wiknam decrees that henceforth there will be free trade - either imports or exports - of soccer balls at the world price of $6. The rm is now a price taker in a competitive market. What happens to domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls? (c) In our analysis of international trade, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price. Does that conclusion
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