Find out and draw a graph of equilibrium under free trade

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Reference no: EM1347294

Now add Foreign, which has a demand curve
and a supply curve
D* = 80 - 20P,
S* = 40 + 20P.

a. Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.

b. Now allow Foreign and Home to trade with each other, at zero transportation cost. Find out and draw a graph of equilibrium under free trade. What is the world price? What is the volume of trade?

Reference no: EM1347294

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