Q1:

In Pakistan, there is only one sugar producer; a government owned monopoly called Pakistan Sugars. Suppose that the company were run in a way to maximize profit for the government. That is, assume that it behaved like a private profit-maximizing monopolist. Assuming demand and cost conditions are given on the following diagram, at what level would Pakistan Sugar target output and what price would it charge?

Now suppose Pakistan Sugar decided to begin competing in the highly competitive Indian market. Assume further that Pakistan maintains import barriers so that Indian producers cannot sell in Pakistan but that they are not immediately reciprocated. Assuming Pakistan Sugar can sell all that it can produce in the Indian market at a price P = PIND indicate the following:

A

Total output

B

Output sold in Pakistan

C

New price in Pakistan

D

Total sold in the India

E

Total profits

F

Total profits on Indian. Sales

G

Total profits on Pakistan Sales