Figure 9-2 shows the free-trade equilibrium under perfect competition and under monopoly (both with the price PW).
Question:
a. Under perfect competition, with the price PW, label the triangle of consumer surplus and the triangle of producer surplus. Outline the area of total Home surplus (PDBʹBPMC).
b. Based on your answer to part (a) in this problem and part (a) of the last problem, outline the area of gains from free trade under perfect competition.
c. Under monopoly, still with the price PW, again label the triangle of consumer surplus and the triangle of producer surplus.
d. Based on your answer to part (c) in this problem and part (d) of the last problem, outline the area of gains from free trade under Home monopoly.
e. Compare your answer with parts (b) and (d). That is, which area of gains from trade is higher and why?
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a Refer to the following figure The freetrade equilibrium under perfect competition has a Home co...View the full answer
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Related Book For 
International Economics
ISBN: 978-1429278447
3rd edition
Authors: Robert C. Feenstra, Alan M. Taylor
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