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Suppose that the production of a good exhibits external economies of scale. In particular, suppose that...

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 another country joins the world market for this good. There, the total cost is given by C*(Q*) = [50/(Q*+2)]Q* + 2Q*. What is the average cost when the quantity produced is 8?

b. Suppose that in this country, the demand for this good is given by QD = (25/6) - (1/6)P. What is the equilibrium price in this country given that it does not trade?

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