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Net Welfare increase with Trade=C
D Note: while some will lose with trade, 400 Qws=800 Qthe loser’s losses are less than the 6
winner’s gains. Importing Country Without trade our importing country has a market for airplanes as described in the graph. P (in millions) Recall, Q* is not only where the importing country is producing but also where they are consuming. S
7 Importing Country Recall the world market price is 100 million (where Qws=Qwd)
Notice no domestic supplier can make air planes at this price so it is beneficial to the exporting S country (it maximizes their total surplus) to import all of the airplanes they will consume. Suppose they import 500 planes. P (in millions) Pd=120
200 500 Q
8 Importing Country Gains from trade for importing country importing airplanes Domestic Welfare for Importing Country
Before Trade Welfare Domestically:
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This note was uploaded on 03/23/2014 for the course ECON 2306 taught by Professor Bailiff during the Spring '08 term at UT Arlington.
- Spring '08