4. Suppose that Foreign had been a much larger country, with domestic demand D* = 800 -...
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4. Suppose that Foreign had been a much larger country, with domestic demand D* = 800 - 200P, 5* = 400 + 200P.
(Notice that this implies that the Foreign price of wheat in the absence of trade would have been the same as in problem 2.)
Recalculate the free trade equilibrium and the effects of a 0.5 specific tariff by Home. Relate the difference in results to the discussion of the "small country" case in the text.
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Related Book For
International Economics Theory And Policy
ISBN: 9780321116399
6th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz
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