Question 1 (15 points) Suppose that the demand facing firms producing Golf clubs in Home and Foreign is given as follows. Qi = S - -b(P - P) The cost of producing Golf clubs is given by TO(Q;) = F + C*Qi a) (6 points) Assume that the parameters for Home are as follows. Sy = 1440, b = 2, F=5, C =1. Compute the equilibrium values of n, P, and Q. {Hint: either derive the expression for marginal revenue from the demand curve above or use the expression for marginal revenue from the text} b) (3 points) Assume that the parameters for Foreign are as follows. SF = 250, b = 2, F =5, C=1. Compute the equilibrium values of n, P, and @ for Foreign c) (6 points) Now suppose that Home and Foreign trade freely in Golf clubs. What are the equilibrium values of n, P, and @ in the integrated economy? Is trade welfare improving for consumers in both countries? Justify your answer. Question 2 (13 points) Suppose that a Chinese solar panel manufacturer has an upward sloping marginal cost function given by MC = 10 @ where O is the total number of solar panels produced by this firm. Denote the number of panels sold in the Chinese market by On and the number of panels sold in the US market by OF. The firm faces a downward sloping demand curve in the Chinese market given by PH =750-5 Q#. It faces a horizontal demand curve in the US market at a price of 500. That is, it can sell any number of panels in the US market at that price. a) (4 points) How many panels will the firm sell in each market? b) (2 points) What is the profit maximizing price of the panels it charges in the Chinese market? c) (3 points) Is the price in the Chinese market higher or lower than in the US market? Will this qualify as dumping? d) (4 points) Show the results diagrammatically. Question 3 (7 points) Here is a list of products: rice, wheat, gold, automobiles, golf clubs, wine, movies. For each of these products explain whether you expect the trade to be inter-industry trade or intra-industry trade