Question
Suppose the demand in the poor country is P=100- 9Q and supply is P=Q. Suppose the supply in the poor country is different from the one in country A only because it faces less strict environmental regulations. That is, in country B it costs firms Q to produce Q units, whereas it costs 2Q in country A to produce quantity Q. Draw country B's demand and supply diagram in 'autarky' with the standard axes (P vertical, Q horizontal). Mark carefully on the diagram the demand curve, the supply curve, and then work out the equilibrium (show working out and the numbers not just the point) . How large is welfare under autarky ?STEP by STEP SOLUTION On YouTube Video
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