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Suppose a profit maximizing automobile manufacturer produces its output in two plants, one in the U.S. and the other in Canada. The total costs of

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Suppose a profit maximizing automobile manufacturer produces its output in two plants, one in the U.S. and the other in Canada. The total costs of producing in the two plants are identical, except that the output produced in the U.S. is subject to a per unit tax, t. Suppose the two total cost functions are TCus - Lus / 2 + 2us + 1+19us TC CAN = QCAN / 2 + @CAN + 1 . The firm's demand function is P-26-Or, where Or is total output in U.S. and Canada. Find the first-order conditions for this problem. ii) Find the reduced form solutions for optimum values of Qus and QCAN . iii) Show that the second-order condition for this problem is satisfied. iv) By partially differentiating your reduced form solutions

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