Consider a large country applying a tariff t to imports of a good like that represented in Figure 8-9.
a. How does the export supply curve in panel (b) compare with that in the smallcountry case? Explain why these are different.
b. Explain how the tariff affects the price paid by consumers in the importing country, and the price received by producers in the exporting country. Use graphs to illustrate how the prices are affected if (i) the export supply curve is very elastic (flat) or (ii) the export supply curve is inelastic (steep).