3. (a) Narrowland, Broadland and Wideland are the only three laptop producing countries in the world. The three countries have the same production technology for every firm, and face the same demand conditions. The annual sales of Narrowland, Broadland and Wideland are 100000, 900000, and 400000 laptops respectively. Fixed cost and marginal cost of production of laptops for each firm in each country are 10000 and 1000 respectively; and the degree of responsiveness of each firm's sales to its price, vis-à-vis other firms is 1/10. (i) Calculate the equilibrium number of firms in the three countries before trade. (ii) What is the equilibrium price in these countries under autarky? (iii) Calculate the total number of firms after the economies are opened up to trade and the equilibrium price. (iv) How will your answer to the above parts change if the marginal cost of production of laptop for every firm increases to 2000? (b) A country produces two goods: Cars (using labour and machines) and Microchips (using labour and computers). There is an exogenous increase in demand for microchips in the world market. Explain income distribution effects of this change with the help of a diagram.

3. (a) Narrowland, Broadland and Wideland are the only three laptop producing countries in the world. The three countries have the same production technology for every firm, and face the same demand conditions. The annual sales of Narrowland, Broadland and Wideland are 100000, 900000, and 400000 laptops respectively. Fixed cost and marginal cost of production of laptops for each firm in each country are 10000 and 1000 respectively; and the degree of responsiveness of each firm's sales to its price, vis-à-vis other firms is 1/10. (i) Calculate the equilibrium number of firms in the three countries before trade. (ii) What is the equilibrium price in these countries under autarky? (iii) Calculate the total number of firms after the economies are opened up to trade and the equilibrium price. (iv) How will your answer to the above parts change if the marginal cost of production of laptop for every firm increases to 2000? (b) A country produces two goods: Cars (using labour and machines) and Microchips (using labour and computers). There is an exogenous increase in demand for microchips in the world market. Explain income distribution effects of this change with the help of a diagram.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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