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please solve questions 3 and 4. both are related to the new trade model Q3-4) Suppose the two countries we considered a numerical example in
please solve questions 3 and 4. both are related to the new trade model
Q3-4) Suppose the two countries we considered a numerical example in the monopolistically competitive automobile industry. The demand curve facing any given producer of automobiles is described in the following equation with b=1/30,000. Thus, the demand facing any one producer is given by Q=S[(1)(1/30,000)(PP)] Q is the number of automobiles sold per firm, S is the total number sold for the industry, n is the number of firms, P is the price that firms charge, and P is the average price of other firms. We also assume that the cost function for producing automobiles is described by an equation with a fixed cost F=+750,000,000 and a marginal cost c=+5,000 per automobile. The total cost is C=750,000,000+(5,000Q). The average cost curve is, therefore, AC=(750,000,000/Q)+5,000. Now suppose there are two countries, Home and Foreign. Home has annual sales of 900,000 automobiles; Foreign has annual sales of 1.6 million. The two countries are assumed, for the moment, to have the same costs of production. a. Draw a figure that shows the PP and CC curves for the Home auto industry. b. In the absence of trade, what are the 1) P (the price of selling autos) and 2 ) Q (number of autos sold per firm), and 3 ) n (number of firms)? c. Indicating the value of P+Q, and n in the figure of the Home market on the long-run equilibrium. d. Draw the PP and CC curves for Forcign e. Calculate the value of P,Q, and n in the figure of the Foreign market, too. Q4) Now, suppose Home and Foreign can trade automobiles costlessly. a. In the integrated market, find Q (the output per firm), P (the price per automobile), and n (the number of firms). b. Draw the PP and CC curves in the integrated market after the trade Step by Step Solution
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