Assume Home and Foreign countries both produce the same good. a. Home's demand curve is D = 1250-5OP, where D is quantity demanded and P is the competitive price. Home's competitive supply curve is given by MC = 4 + S/100, where S is quantity-supplied. Assuming P = MC and D=S, solve for Home's equilibrium price and quantity. b. Solve P when S=0 and when D=0 in order to find the vertical intercepts, and draw the supply and demand diagram. Solve for both consumer surplus and producer surplus. c. Foreign's demand curve is also D* = 1250-50P*, but Foreign's supply curve is given by MC* = 1 + S*/100. Assuming P* = MC* and D*=S*, solve for Foreign's equilibrium price and quantity. Draw the supply and demand diagram for Foreign, and solve for Foreign's consumer surplus and producer surplus.
Assume Home and Foreign countries both produce the same good. a. Home's demand curve is D = 1250-5OP, where D is quantity demanded and P is the competitive price. Home's competitive supply curve is given by MC = 4 + S/100, where S is quantity-supplied. Assuming P = MC and D=S, solve for Home's equilibrium price and quantity. b. Solve P when S=0 and when D=0 in order to find the vertical intercepts, and draw the supply and demand diagram. Solve for both consumer surplus and producer surplus. c. Foreign's demand curve is also D* = 1250-50P*, but Foreign's supply curve is given by MC* = 1 + S*/100. Assuming P* = MC* and D*=S*, solve for Foreign's equilibrium price and quantity. Draw the supply and demand diagram for Foreign, and solve for Foreign's consumer surplus and producer surplus.
Chapter4: Demand, Supply, And Market Equilibrium
Section: Chapter Questions
Problem 25P
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