2. Now add Foreign, which has a demand curve and a supply curve D* = 80 -...

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2. Now add Foreign, which has a demand curve and a supply curve D* = 80 - 20P, 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: 9780321116399

6th Edition

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

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Question Posted: Oct 01, 2024 11:01 AM

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