Only one firm produces and sells soccer balls in the country of Wiknam, and as t

Question

Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist

Explanation / Answer

a) since MR=MC, then 10-2Q=1+Q. So, the monopolist produce Q=3 price P=10-Q=10-3=7 profit=7*3-TC=21-(3+3+0.5*3^2)=10.5 b)since the P=7>6, domestic production will decrease for importing soccer balls. The domestic consumption will increase for relative less price of importing. For Wilknam, it will import soccer balls. Because the world price of $6 is less than the domestic price. The domestic price will be $6. Wiknam will import soccer balls.So the domestic production of soccer balls will be less. the domestic consumption will be more. The consumer and society benefit will gain from trade. c)yes, it holds that Wiknam will be an importer. Because the price for domestic production is 7 which is less than the world price 6. yes, the Wiknam price without trade is above the world price.when the King of Wiknam decrees that henceforth there will be free trade,The wiknam become an importer. d)Since the price within country is the same with price out of country, and also, MC=1+Q=4

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