International Trade

Domestic Monopolist and Trade

Domestic Monopolist and Export

Before trade, this country produces where MR=MC, [1] with production Q1 [2] and price Pd. [3]

After trade, the world price PW [4] is lower than Pd (but still higher than where DD=MC). Thus the good is infinitely imported or exported with price PW.

The domestic monopolist produces where PW=MC as PW=MR: in other words, it produces Q2 [5] and consumers consume Q3. [6] Then the amount exported is Q2 - Q3. [7]
As a result:
  • Consumer surplus changes from APdB [1] to APWE. [2]
  • Producer surplus changes from CPdBH [3] to CPWF. [4]
  • The net gain is BGE+HGF [5]
    		•


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    [mtcha@ecel.uwa.edu.au]
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