ECON 441 Midterm: Exam 2 Summer 2003
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Note: you do not necessarily need to draw any diagrams for this part, unless you find that it helps you to find the answer. [6 points] for the same policy you chose in part (b), draw and explain an equilibrium in which the policy does reverse the pattern of trade. Summer term 2003: [18 points] we have argued that when an industry in a country is imperfectly. Page 2 of 2 competitive, then trade can provide an additional, pro-competitive benefit, over and above the gains from comparative advantage, to the extent that it forces producers to behave more like perfect competitors. Use, for each, both the tools of the model and an explanation in words. In fact, assume that home produces only m and foreign produces only f, and further that the equilibrium relative price of m is above the autarky price in.
