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Home's demand curve for books is D = 90 - 10?. Its supply curve is S = 10 + 101'. Derive and graph Home's import demand schedule. What would the price of books he in the absence of trade? Now add Foreign, which has a demand curve and a supply curve: 0* = 60 - ll}? 3* = 20 + 1th Derive and graph Foreign's export supply curve and nd the price of wheat that would prevail in Foreign in the absence of trade. 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? Home imposes a specic tariff of 1.5 on books imports. i. Determine and graph the effects of the tariff on the following: (1) the price of books in each country; (2) the quantity of books supplied and demanded in each country; (3) the volume of trade. ii. Determine the effect of the tariff on the welfare of each of the following groups: (1) Home import-competing producers; {2) Home consumers; (3) the Home government. iii. Show graphically and calculate the terms of trade gain, the efficiency loss, and the total effect on welfare of the tariff. Suppose Foreign had been a much larger country, with domestic demand I)" =8-2P,S* =4+2P. (Notice that this implies the Foreign price of wheat in the absence of trade would have been the same as in problem 2.) Recalculate the free trade equilibrium and the effects of a 1.5 specic tariff by Home. Relate the difference in results to the discussion of the small-country case in the text