Reference no: EM131220100

Read the following article on changes in Spain's wine industry: https://goo.gl/9fZKml then answer the following questions.

a.) The article notes that Spanish and Italian wine were exported for the same price in 2000, but in 2014, "Italy was selling its wine for an average of $2.78... while Spain's sold for $1.30." Use a market supply and demand diagram with separate supply and demand curves for exported wine from Italy and Spain to depict this situation. Use two sets of axes - one for 2000 and the other for 2014. Your diagram should depict that the price in 2000 was equal across countries, and in 2014 the price was lower in Spain than in Italy.

b.) The article mentions that a lot of Spanish wine producers rely on bulk and economies of scale. Suppose a typical producer has fixed costs equal to $20 million and marginal costs equal to $1 per liter. Calculate their average total costs at ,000; ,000 and ,000,000.

c.) On a diagram depict this firms MC and ATC curve for the quantities listed in part b. Be sure that the amounts are clearly indicated on both axes.

d.) Suppose costs are what are stated in part b.) and the market price is equal to $1.30 per liter. How many liters would have to be sold for this producer to be profitable?