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Dumping. Assume that a firm is a monopolist at Home facing the inverse-demand curve, P =...

Dumping. Assume that a firm is a monopolist at Home facing the inverse-demand curve, P = 10 − Q, but is one of many competitors in the world market, where it can sell its output at a price Pw = 2. Furthermore, assume that the firm’s total cost is given by: T C (Q) = 10 + (Q^2)/2. Answer the following questions:

(a) Find the optimal level of output that maximizes the firm’s total profits. Is it optimal for the firm to export?

(b) What happens if Pw increases to 4? Explain the economic intuition.

(c) Now suppose that Pw = 6. Is this firm dumping?

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