Draw a partial-equilibrium diagram

Reference no: EM132209084

Question: Draw a partial-equilibrium diagram in which country A imports a homogenous product from both country B and the rest of the world (ROW). Country A has market power relative to country B (country B's export supply curve is upward sloping) but is small relative to ROW (its supply curve is horizontal at price p*). In the initial equilibrium A has a common (specific) tariff on both B and ROW. Now let A form a FTA with B but not ROW. Analyze the price and welfare implications for A in terms of this particular good.

Reference no: EM132209084

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