Information for questions 9-15 The market for paintings (a g…
Information for questions 9-15 The market for paintings (a good with external economies of scale) is shown in the following figure. Note that one horizontal grid space is 20 paintings, and one vertical grid space is $2. Costs The only countries that can make paintings are France and Italy, and their Average Cost curves are shown, labeled ACFR and ACIT, respectively. Demand Two possible demand curves for paintings in France (labeled DFR,1 and DFR,2) are shown. There is no demand at all for paintings in Italy. The world demand for paintings is labeled DWORLD. Initially, all countries of the world are in autarky, therefore: 1) France produces paintings for its domestic market only; 2) Italy has no reason to produce paintings, therefore does not do so; and 3) the rest of the world does not have access to paintings. For the numerical questions, only the exact answers are accepted. Answers can be made exact with the usual convention: if two lines seem to intersect at a grid point, assume that they do so exactly. For example, line DFR,2 and line ACIT intersect exactly at p= 14, and q= 500. Use a ruler if you need to! If a numerical question cannot be answered with the information given, enter 0. After the market for paintings opens up in the whole world, what best describes the optimal outcome?
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