The Small Island Nation Of Atlantis Used To Engage In Free Trade With The Rest Of The World. Consumers There Used To Enjoy Many Varieties Of Cars, Some Made Locally But Most Made Abroad. Due To Product Differentiation, The Global Car Mar- Ket Is Characterized By Market Power, Monopolistic Competition Between Homogeneous Firms. Following Shocking

[15pt] The small island nation of Atlantis used to engage in free trade with the rest of the world. Consumers there used to enjoy many varieties of cars, some made locally but most made abroad. Due to product differentiation, the global car mar- ket is characterized by market power, monopolistic competition between homogeneous firms. Following shocking revelation in the press about human rights abuses by the Atlantis government, the nation becomes an international pariah, subject to a harsh embargo, no other country will trade with them anymore. Use a diagram appropri- ate for the structure of the car market to illustrate the consequences of this embargo for the number of car varieties available to Atlantis consumers and the price of cars there. Is the embargo making them better- or worse-off?