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DP Gumby produces sleeveless sweaters. He can separate the demand function into a domestic compon...

DP Gumby produces sleeveless sweaters. He can separate the demand function into a domestic component: QD= 32 –0.4PD

and a foreign component. QF= 18 –0.1PF His total cost function is:C = 50 + 40Q

1(a)On three separate diagrams sketch the demand curve in the domestic market, the demand curve in the foreign market and the total demand curve.(6 marks)

(b)If Gumby must charge the same price both home and abroad, how many sweaters should he sell and what price should he charge to maximize profits? How much profit does he make. 5 marks

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