Now add Foreign, which has a demand curve D* = 80 - 20P And a supply curve

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Now add Foreign, which has a demand curve

D* = 80 - 20P

And a supply curve

S* = 40 + 20P.

a. Derive and graph Foreign’s export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.

b. Now allow Foreign and Home to trade with each other, at zero transportation cost. Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade?

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International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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Question Posted: Oct 24, 2012 11:41 PM

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Now add Foreign, which has a demand curve D* = 80 - 20P And a supply curve

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a Foreigns export supply curve XS is XS 40 40 x P ...View the full answer

International Economics Theory and Policy

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