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Thank you PARTIAL EQU'JLIBRIUEI MODEL DUE: P HOME P FOREIGN 1: AUTARCHY (1 point) a) Depict Autarchy Prices and Output in HOME and FOREIGN. Compare.

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PARTIAL EQU'JLIBRIUEI MODEL DUE: P HOME P FOREIGN 1: AUTARCHY (1 point) a) Depict Autarchy Prices and Output in HOME and FOREIGN. Compare. (2 points) 1)) Show the social surplus in each country. EG identify Consumer and Producer Surpluses. (2 points) c) Explain why, in autarchy, the unregulated outcome (under perfect competition) maximizes social surplus. Prove that the claim is true. 2: FREE TRADE: now suppose we open to free trade. (4 points) a) Depict the Excess DEL'IAND and SUPPLY curves. Then illustrate the free-trade equilibrium output, consumption, and importsfexports for HOME and for FOREIGN. Use the 3-pane gure. (4 points) 1)) Identify the new Consumer, Producer and Private Surpluses in Home and Foreign. Do they rise fall? Explain what is happening and why. (2 point) c) Show and explain why both countries can Gain from Free Trade. Give the intuition. 3: FREE TRADE: Suppose Home's production supply curve rises (cg shis right-own) (2 points) a) Show what happens to Home's ED-ES curve. Explain (2 points) b) What happens to free-trade prices, equilibrium output, consumption, and importsx'expor'ts in each country. Show in a diagram and explain. (3 points) c) Does HOME surplus rise? Show and explain. EG identify what happens to consumer and producer surpluses in Home. Relate to Terms Omea'e. (3 point) d) Does FOREIGN surplus rise? Show and explain. EG identify what happens to consumer and producer surpluses in Foreign. Relate to the Terms Omea'e

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