Suppose that the production of a good exhibits external economies of scale. In particular, suppose that the total cost of producing a quantity Q of the good is given by C(Q) = [100/(Q + 2)]Q +2Q.
a. Suppose that for the whole world, the demand for this good is given by QD = 50 - (1/2)P and all the production of the good is concentrated in the country in question. What is the world equilibrium output?
b. What is the world equilibrium price?
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