External economies of scale:

a) Suppose that Australia and New Zealand are both interested in producing milk, but Australia starts off already being the world's producer of milk. Using the external economies model from class, draw the scenario where Australia is the initial world's supplier of milk but New Zealand is able to enter the milk market and become the world's supplier of milk. Using the diagram, argue whether the entry of New Zealand into the milk market is good for milk consumers and why.

b) In our lectures we learned about the Napoleonic blockade. Draw this example using the dynamic version of the external economies of scale model, but instead drawing curves for France and England to illustrate an alternative scenario where France is not able to enter the cotton industry even with some temporary protection.