Suppose demand in Domestic is given by the linear market demand curve P-80-Q. Domestic autarkic and served by a monopolist with constant marginal cost MC-S1, total variable costs of TVC-ax Q, and no fixed costs. The world price is PW, Domestic is able to set an import quota, M, or use a tariff, r. 2.1 What is the monopolist's profit in autarky? (Hint: derive marginal revenue first) Suppose Domestic opens up to trade with PW-10 2.2 What is the monopolist's profit when 70 and there is no quota? 2.3 What is the monopolist profit when M-20 and there is no tariff? 2.4 Which situation does the monopolist prefer? 1 When r 0 and there is no quota. 2 When M 20 and there is no tariff.

Suppose demand in Domestic is given by the linear market demand curve P-80-Q. Domestic autarkic and served by a monopolist with constant marginal cost MC-S1, total variable costs of TVC-ax Q, and no fixed costs. The world price is PW, Domestic is able to set an import quota, M, or use a tariff, r. 2.1 What is the monopolist's profit in autarky? (Hint: derive marginal revenue first) Suppose Domestic opens up to trade with PW-10 2.2 What is the monopolist's profit when 70 and there is no quota? 2.3 What is the monopolist profit when M-20 and there is no tariff? 2.4 Which situation does the monopolist prefer? 1 When r 0 and there is no quota. 2 When M 20 and there is no tariff.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.8P

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