Question: Again for the same model, suppose that Home does not impose any trade policy, but Foreign provides a $5 per ton export subsidy. (a) Analyze

Again for the same model, suppose that Home does not impose any trade policy, but Foreign provides a $5 per ton export subsidy.
(a) Analyze the effects on the equilibrium, showing how the Foreign export supply curve is shifted and how prices, trade quantities, and welfare are affected.
(b) Show the terms-of-trade effect in the Foreign welfare diagram. For which country is this a benefit? For which country is it a loss?

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