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Consider the production decision of a high-end producer of DVD players who behaves as a monopolistic competitor facing a demand curve with parameter b = 1/1000. Fixed costs (F) are $500,000 and the marginal cost of producing a DVD player (c) is $100. Suppose Home has annual DVD player sales (S) of 50,000 units. Suppose all of these parameters are the same for all firms in the industry. In the absence of trade, how many firms will produce DVD players? What will be the equilibrium price of a DVD player?
In the case of trade, there are ___ firms producing DVD player in the orld, and the equilibrium price of a DVD palyer is $ _____
The consumers benefit from the market integration by _________________________
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