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Question: Figure 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 answers 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 answers 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 answers to parts (b) and (d). That is, which area of gains from trade is higher and why?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92287752

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