Now add Foreign, which has a demand curve D* = 80 - 20P And a supply curve
Question:
Now add Foreign, which has a demand curve
D* = 80 - 20P
And a supply curve
S* = 40 + 20P.
a. Derive and graph Foreign’s export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.
b. Now allow Foreign and Home to trade with each other, at zero transportation cost. Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade?
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Step by Step Answer:
a Foreigns export supply curve XS is XS 40 40 x P ...View the full answer
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Related Book For 
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
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