d. Now find the free trade equilibrium, assuming no transportation costs or tariffs, by setting P = P* and D+D* = S+S*. Solve for the free trade price, and the quantities demanded and supplied for both countries. Show your solution on your supply and demand diagrams, and solve for each country's consumer and producer surplus. How much does the total surplus in each country rise as a result of free trade? e. Home now levies an 80 cent tariff on imports from Foreign. To solve this, set P = P* + 0.80, and then set D+D* = S+S*. Simplify and substitute until you solve for both P and P*, and then solve for the quantities demanded and supplied for both countries. Show your solution on your supply and demand diagrams. Relative to the free trade equilibrium, how much does each country's consumer and producer surplus change? How much revenue is collected by Home's government? How much does total surplus (welfare) change in each country? What happens to total welfare considering both countries?

d. Now find the free trade equilibrium, assuming no transportation costs or tariffs, by setting P = P* and D+D* = S+S. Solve for the free trade price, and the quantities demanded and supplied for both countries. Show your solution on your supply and demand diagrams, and solve for each country's consumer and producer surplus. How much does the total surplus in each country rise as a result of free trade? e. Home now levies an 80 cent tariff on imports from Foreign. To solve this, set P = P + 0.80, and then set D+D* = S+S. Simplify and substitute until you solve for both P and P, and then solve for the quantities demanded and supplied for both countries. Show your solution on your supply and demand diagrams. Relative to the free trade equilibrium, how much does each country's consumer and producer surplus change? How much revenue is collected by Home's government? How much does total surplus (welfare) change in each country? What happens to total welfare considering both countries?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter4: Demand, Supply, And Market Equilibrium

Section: Chapter Questions

Problem 19P

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