1. (16 points, 8 points each part) The accompanying graph shows an economy in which industry Y is a monopoly that charges some markup over marginal cost. In autarky, production and consumption take place at point A_m. Autarky equilibrium with a perfectly competitive Y industry would be at A. The country is small, and the world price is given by price line p*, which happens coincidentally to be tangent to the PPF at A.

Am D X