Home's Domestic Demand and supply curves for shoesare D = 500-10P and S = 300+20P. Foreign's domesticdemand and supply curves for the same type of shoesare D = 1000-10P and S = 200 + 40P.(a) Find the autarky price and quantity for eachcountry. If the countries trade, which country will exportshoes?(b) Derive algebraically the import demand and exportsupply functions. Find the price and volume of tradewith free trade.

Autarky means that self sufficient market where no trade occurs between two countries because…

Answered: Home's Domestic Demand and supply…

Home's Domestic Demand and supply curves for shoes are D = 500-10P and S = 300+20P. Foreign's domestic demand and supply curves for the same type of shoes are D = 1000-10P and S = 200 + 40P.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter21: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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Question

Home's Domestic Demand and supply curves for shoes
are D = 500-10P and S = 300+20P. Foreign's domestic
demand and supply curves for the same type of shoes
are D = 1000-10P and S = 200 + 40P.
(a) Find the autarky price and quantity for each
country. If the countries trade, which country will export
shoes?
(b) Derive algebraically the import demand and export
supply functions. Find the price and volume of trade
with free trade.

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