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Q. Draw a production possibility frontier that is consistent with above assumptions. Depict an initial world trade equilibrium and consumption possibilities of large country, consistent with above assumptions. Suppose large country imposes a tariff on its imports. How do country's Terms of Trade change? How does domestic price ratio change? How will large country's production pattern change? How will large country's consumption and trade pattern change? How is welfare affected? Suppose large country promotes its exports with a cost subsidy to producers. How do country's Terms of Trade change? How does domestic price ratio change? How will country's production pattern change? How will its consumption and trade pattern change? How is welfare affected? Is re a difference to import tariff?
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