You first have to calculate the current price by setting demand equal to supply. And then we know that MC = P. So you take the first derivative of the cost function set it equal to your calculated price and solve for q.
9 months ago
How do I calculate the gains from trade to get the correct answer c) ? I get double the right amount...
Hey, the first step is to calculate the old Market Equilibiurm to find the domestic price. Because the domestic price is higher than the world price Italy will import. After that you calculate the supply and demand at a price of 25, to find the quantity which is imported. The triangle in the picture represents the gains from trade. Hope that helps :)
So here you basically want to end up with Q/q which is the total quantity in the industry divided by the quantity of an individual firm. We can find our q from the point MC=ATC (because we are in a perfectly competitive market where we don't make profit in the long run). From here we can also get to our P. Then plugging P into the demand curve will give us Q and then we can solve for Q/q.
Hope that helps, let me know if you have any other questions.
So the idea for this question is that you have to calculate the best response curve of firm 1 and then you plug in the quantity of firm 2 (q2 = 40). You find the best response curve by setting MR = MC and then solve for q1. If there are more questions, please let me know
The important thing about this question is that we don't have demand in both parts of the country at a price of 11, so you can't just add up the two demand functions. For a price of 11, there is only demand in the north so you just plug in P=11 into the demand function of the north
The tax rate is equal to the difference between the supply price and demand price functions after the tax is imposed.
So, in this question, you would plug in the Q Tax of 40 into both functions. Also note that you do not need to reverse the inverse functions for this question. You just need to plug in the quantity tax into each function, find the new prices and the difference will be the tax rate!
Inverse Demand function. 190 - 40 = 150
Inverse Supply Function. 10 +2*40 = 90
(150-90) = 60.
This question is a lot easier than it looks, and they probably made the supply & demand function inverse to trip people up. But, remember, that.
tax rate = (The difference between demand and supply price with the quantity tax imposed)
t = ( (190-40) - (10+2*40) = 60
I'll attach a more in-depth explanation in an image, my hand writing is extremely messy so apologizes in advance
WHAT'S UP WITH THATKARMA?