1. Redraw Fig. 17.7 to show that the Home country subsidy could make the Foreign Country better off.
   

Welfare effects on foreign are shown in Fig 17.7 The increased production by home means that it captures a larger share of the world market. The demand curve facing the foreign firm shifts left at each price of X. The foreign firm will reduce production, moving to a point like B. mm 11.1 The price ratio has fallen to p' as in home so consumers in F import X to arrive at he consumption bundle C