A firm has two plants with cost functions: TCA = qA2 & TCB = 4qB2
It is the only producer of this good in a country with demand for it given by: QD = 104 – 2P
A. If this good cannot be imported or exported, how much will be produced, and how will production be divided between the two plants? What is the price and the firm’s profit?
B. Now the good can be exported and sold at a price of $40, but importing is still banned. What is different in the firm’s behavior in the foreign versus the domestic market? How much will the firm produce, how will production be divided between the two plants, and how much will be sold in the two markets? What is the price in the domestic market, and what will be the firm’s profit?