Suppose that Foreign had been a much larger country, with domestic demand D* = 800 - 200P,

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Suppose that Foreign had been a much larger country, with domestic demand

D* = 800 - 200P, S* = 400 + 200P.

Recalculate the free trade equilibrium and the effects of a 0.5 specific tariff by Home. Relate the difference in results to the discussion of the small country case in the text.

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International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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Question Posted: Oct 24, 2012 11:41 PM

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Suppose that Foreign had been a much larger country, with domestic demand D* = 800 - 200P,

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When the Home country is very small relative to the Foreign country its effects on the terms of trad...View the full answer

International Economics Theory and Policy

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