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's demand, marginal revenue, total cost, and marginal cost: Demand: P=15−Q Marginal Revenue: MR=15−2Q Total Cost: TC=3+Q+0.5 Marginal Cost: MC=3+Q where QQ is the quantity and PP is the price measured in Wiknamian dollars. The monopolist produces soccer balls and sells them at a price of $ each. The monopolist's profit is $ in this case. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market. The domestic production of soccer balls will (rise or fall) to soccer balls, and domestic consumption will (rise or fall) to __ soccer balls. Therefore, Wiknam will (import or export) soccer balls in this case. In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price. In this case, the price without trade is (higher or lower) than the world price, and the country is an (importer or exporter). This is because the claim made in Chapter 9 assumed the domestic market was (competitive or monopolistic). Suppose that the world price was not $10 but, instead, happened to be exactly the same as the domestic, monopolistic price without trade. Allowing trade in this case would result in the country (neither exporting nor importing or importing or exporting) soccer balls.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 9PA

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Problems and Applications Q9

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's demand, marginal revenue, total cost, and marginal cost:

Demand:	P=15−Q
Marginal Revenue:	MR=15−2Q
Total Cost:	TC=3+Q+0.5
Marginal Cost:	MC=3+Q

where QQ is the quantity and PP is the price measured in Wiknamian dollars.

The monopolist produces __________ soccer balls and sells them at a price of $ __________ each. The monopolist's profit is $ __________ in this case.

One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market.

The domestic production of soccer balls will (rise or fall) to __________ soccer balls, and domestic consumption will (rise or fall) to __________
soccer balls. Therefore, Wiknam will (import or export) soccer balls in this case.

In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price.

In this case, the price without trade is (higher or lower) than the world price, and the country is an (importer or exporter). This is because the claim made in Chapter 9 assumed the domestic market was (competitive or monopolistic).

Suppose that the world price was not $10 but, instead, happened to be exactly the same as the domestic, monopolistic price without trade.

Allowing trade in this case would result in the country (neither exporting nor importing or importing or exporting) soccer balls.

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