Example Question 15: In this example, let's consider that Home is a "small" country that exports to the world market (remember the difference from small to large countries in these examples). Let's consider that Home provides a production subsidy to its domestic firms. First, draw two diagrams. In the first diagram, show the supply and demand in the Home country. In the second diagram, show supply and demand in the world market. Then on the same two diagrams, show how the subsidy affects social surplus compared with the case with free trade. Clearly indicate which parts are transfers vs. net gain/loss of surplus for the Home country. Lastly, explain how the result would be different if Home provided an export subsidy. Example Question 15: In this example, let's consider that Home is a "small" country that exports to the world market (remember the difference from small to large countries in these examples). Let's consider that Home provides a production subsidy to its domestic firms. First, draw two diagrams. In the first diagram, show the supply and demand in the Home country. In the second diagram, show supply and demand in the world market. Then on the same two diagrams, show how the subsidy affects social surplus compared with the case with free trade. Clearly indicate which parts are transfers vs. net gain/loss of surplus for the Home country. Lastly, explain how the result would be different if Home provided an export subsidy