Homes demand curve for food is D = 100 - 20P and its supply curve is S = 20 + 20P.

Foreign, which has a demand curve D* = 80 - 20P and a supply curve S* = 40 + 20P.

a. Foreign (exporting country) offers exporters a subsidy of 0.5 per unit. ( an ad valorem subsidy)

Graphically show the effects on the price in each country and on welfare, both of individual groups and of the economy as a whole, in both countries.

a.1 Determine and graph the effects of the tariff on the following: (1) the price of food in each country; (2) the quantity of food supplied and demanded in each country; (3) the volume of trade.

a.2 Calculate and Graphically show the effect of the import quota on the welfare of each of the following groups: (1) Foreign import-competing producers; (2) Foreign consumers; (3) the Foreign government.

a.3 Graphically show the government subsidy and the efficiency loss of the subsidy.