Question 1
Below, you are provided with the firm-level demand, marginal revenue, and relevant cost curves for Knight Trucks. Knight Rider produces electric pick-up trucks in the monopolistically competitive pick-up truck market. Suppose, initially, that this graph depicts the scenario in which trucks are not traded internationally.
$,1
(in thousands)
Part (i): Suppose that the United States does not trade electric pick-up trucks internationally. Identify the profit-maximizing number of electric trucks that Knight Rider will sell, as well as the profitmaximizing per-truck price that Knight Rider will charge.
Part (ii): Suppose that the United States does not trade electric pick-up trucks internationally, and that Knight Rider produces and sells the quantity that you identified in part (i). How much profit does Knight earn? What does this tell you about whether there is currently an incentive for new firms to enter the domestic electric pick-up truck market, or for existing firms to exit this market?
Question 1 Below, you are provided with the firm-level demand, marginal revenue, and relevant cost curves for Knight Trucks.Knight Rider produces electric pick-up trucks in the monopolistically competitive pick-up truck market. Suppose, initially, that this graph depicts the scenario in which trucks are not traded internationally. S $70k
$60k
$50k
$40k
$30k
$20k
$10k
5
10
15
20 25 30 35 Quantity of Electic Trucks (in tho usands)
Parti):Suppose that the United States does not trade electric pick-up trucks internationally.ldentify the profit-maximizing number of electric trucks that Knight Rider will sell, as well as the profit maximizing per-truck price that Knight Rider will charge.
Part (ii): Suppose that the United States does not trade electric pick-up trucks internationally,and that
Knight Rider produces and sells the guantity that you identified in parti.How much profit does Knight earn? What does this tell vou about whether there is currently an incentive for new firms to enter the domestic electric pick-up truck market,or for existing firms to exit this market?