b. Let A 5 1,000 5 C, a 5 b 5 1 5 g 5

d, B 5 0, and D 5 2400. Verify that you get the same result as what is reported in part B of the text for the same parameters when t 5 0 and when t 5 100.

of tariffs and import quotas so long as additional policies assist those who would otherwise lose surplus.

We also showed that the burden of tariffs (and quotas) will shift to those regions in which consumers and producers behave more in elastically (relative to price), just as taxes within a market are shifted to the more inelastic side of the market.

Finally, we extended our insights on trade across markets to two other settings. First, we showed a symmetry in outcomes between “trade in goods” and “migration of labor.” Outsourcing of production to low-wage countries arises in environments where goods can be traded freely and firms therefore move to where labor costs are the cheapest, and immigration of labor to high-wage countries arises when labor is freely mobile and moves where firms locate to produce output. In both cases, the high-wage country essentially employs workers from the low-wage country to produce goods, but workers stay in their home country under outsourcing while moving to the high-wage country under labor mobility. Second, we illustrated how trading across time is quite similar to trading across regions, with the exception that price differences are directly observed in the latter (by exporters and importers) but only guessed (by speculators) in the former. Still, just as trade across regions causes prices to equalize across these regions, so trade across time can cause prices to stabilize across time, at least when speculators guess correctly about the future or when seasonal demand or supply fluctuations are relatively predictable.