Question 5 (30 marks). (Buy and sell Maple Syrup in a competitive international

Question

Question 5 (30 marks). (Buy and sell Maple Syrup in a competitive international market) The Canadian demand for maple syrup is captured by the function Qd = 1040-p, where p is the market price for a jar of maple syrup. There are currently 25 identical profit maximizing firms in Canada producing maple syrup, mostly in the region of Quebec. Each firm faces the cost function TC(q) = 128 +0.5Q2. Canadian consumers consider domestic and foreign-produced maple syrup identical. Currently Canadian consumers have access to a huge supply of maple syrup from abroad for the price of $12 per jar (think of the worldwide supply of maple syrup jars as a horizontal curve at p 12). and foreign-produced maple syrup

Explanation / Answer

(a) We are given, total cost function of the firm, T.C=0.5 q^2+128, if differentiate variable cost at, q=0, then we will get supply curve of that firm. which is Qs=1*q= q.

given Qd= 1040-p.

( i)So number of jars imported will be, = domestic demand - domestic supply,

=1040-p-q.

(ii) Price of each jar of maple syrup in canada will be, Price, P=Qd* Qs=(1040-p)*(q)

(iii). Numbers of jars purchased in the country Total supply- imported jars

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