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Figure 8-2 shows the free-trade equilibrium under perfect competition and under monopoly (both with the price PW).

This question was answered on Jan 11, 2013. View the Answer
Figure 8-2 shows the free-trade equilibrium
under perfect competition and under monopoly
(both with the price PW). In this problem,
we compare the welfare of Home consumers in
the no-trade situation and under free trade.
a. Under perfect competition, with the price
PW, label the triangle of consumer surplus
and the triangle of producer surplus.
Outline the area of total Home surplus (the
sum of consumer surplus and producer
surplus).
b. Based on your answer to part (a) in this
problem and part (a) of the last problem,
outline the area of gains from free trade
under perfect competition.
c. Under monopoly, still with the price PW,
again label the triangle of consumer surplus
and the triangle of producer surplus.
d. Based on your answer to part (c) in this
problem and part (d) in the last problem,
outline the area of gains from free trade
under Home monopoly.
e. Compare your answer to parts (b) and (d).
That is, which area of gains from trade is
higher and why?

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Hi, I found the diagram on the net and my answer is based... View the full answer

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P E1 C F figure 8-2 shows the free-trade equilibrium under perfect competition and under
monopoly (both with the price PW). In this problem, we compare the welfare of Home
consumers in
the no-trade...

This question was asked on Jan 10, 2013 and answered on Jan 11, 2013.

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