Consider the Home country with the demand curve for coffee-makers given by
P = 100 -2Q,
and the supply curve given by
P=10+Q.
(a) Calculate the equilibrium price and quantity of coffee-makers.
(b) Draw consumer surplus and calculate its exact value.
(c) Draw producer surplus and calculate its exact value.
Now assume that Home opens up to trade. Suppose it is a small economy so it faces the fixed world price of coffee-makers equal $50.
(d) Draw the new consumer surplus. Calculate its exact value.
(e) Draw the new producer surplus. Calculate its exact value.
(f) Given your answers in (d) and (e), does Home gain or lose from free trade