3. Consider a country which is initially in autarky and an industry which is monopolistically competitive. a. Use cost curves, the demand curve and marginal revenue curve to draw a diagram showing a monopolistically competitive firm in long-run equilibrium. b. Suppose the country opens up to free trade. The firm depicted above now has access to a larger market, but also faces more competitors. How will its new demand curve compare with its old curve? What happens to output? The average cost of producing this output? How does this relate to the gains from trade in the model of monopolistic competition? Show the changes on your diagram and explain.3. Consider a country which is initially in autarky and an industry which is monopolistically competitive. a. Use cost curves, the demand curve and marginal revenue curve to draw a diagram showing a monopolistically competitive firm in long-run equilibrium. b. Suppose the country opens up to free trade. The firm depicted above now has access to a larger market, but also faces more competitors. How will its new demand curve compare with its old curve? What happens to output? The average cost of producing this output? How does this relate to the gains from trade in the model of monopolistic competition? Show the changes on your diagram and explain.

3. Consider a country which is initially in autarky and an industry which is monopolistically competitive. a. Use cost curves, the demand curve and marginal revenue curve to draw a diagram showing a monopolistically competitive rm in long-run equilibrium. b. Suppose the country opens up to free trade. The rm depicted above now has access to a larger market, but also faces more competitors. How will its new demand curve compare with its old curve? What happens to output? The average cost of producing this output? How does this relate to the gains from trade in the model of monopolistic competition? Show the changes on your diagram and explain