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Could you please send me the solution to the following problem?
Suppose there are two producers of silver in the world: Mexico and Peru. In 2014, total production was 280 (millions of ounces), whereas price was $18 per ounce. Marginal cost is constant at the level of $10 per ounce (Mexico) and $12 per ounce (Peru). Finally, suppose that firms compete according to the Cournot model (output levels are determined simultaneously and the equilibrium price is such that total demand equals total supply
(a) Assuming that demand is linear, determine the coefficients of the demand curve that are consistent with the observed data.
(b) Suppose that a third country, China, discovers silver mines with a marginal cost of production equal to Peru. What impact do you expect this will have on the price of silver?
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The business was a modest success and allowed Martha to experiment with new growing methods. Two years ago, Martha's research paid off.
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