Home » Wine producers are located in two markets: Argentina and Chile.

Wine producers are located in two markets: Argentina and Chile.

Wine producers are located in two markets: Argentina and Chile. They engage

in monopolistic competition and all rms have marginal cost equal to c = 1,

fixed cost equal to F = 200, and a parameter b reacting sensitivity of quantities

to prices equal to b = 0:2. Argentina has market size SA = 2560, and Chile has

market size SC = 1440 (Recall that in this model we have Q = S[1/n – b(P – P)]).

(a) Derive what happens to variety, price, the markup and quantity as the

two markets integrate. For which market are the absolute changes in prices and

rm quantities larger?

(b) In the standard analysis we have ignored trade costs. Imagine instead

that there is a per-unit trade cost t for selling in the other market, and that

t = 3. Under these circumstances, is there trade or not? To solve for that,

you have to check whether a Chilean firm would find it profitable to export to

Argentinian market and whether an Argentinian firm would find it profitable to

export to Chilean market.

(c) Now imagine that t falls to 1:5. Is there trade or not? If yes, are

both countries exporting now? Without solving for equilibrium, argue how do

exporters in a given market compare to domestic firm in terms of their prices,

quantities sold in this market and markups?

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10