Question
Widget Inc. is completely insulated from import competition and enjoys a monopoly position in its domestic market where demand is described by: Domestic Demand: PDom
Widget Inc. is completely insulated from import competition and enjoys a monopoly
position in its domestic market where demand is described by:
Domestic Demand: PDom = 120 (1/10) QDom PDom and QDom pertain to the domestic
market.
The firm exports some of its total widget production Q.
It has no market power in the perfectly competitive world market where widgets sell for:
World market price:Pw = 80
The firm's marginal cost is a function of its total output Q with: MC = 50 + (1/10) a
a. Determine the profit-maximizing output and price in the domestic market.
b. Compute the domestic price elasticity of demand in equilibrium and verify the
inverse elasticity pricing rule.
c. How many widgets will the firm sell in the world market?
Please solve all the parts with proper explanation and do it asap, thanks
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