International Trade

Domestic Monopolist and Trade

Domestic Monopolist and Export

Before trade, this country produces where MR=MC, with production Q1 and price Pd. (1)

After trade, the world price PW 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 and consumers consume Q3. Then the amount exported is Q2 - Q3. (2)

(1)  (2)

As a result:

* Consumer surplus changes from APdB to APWE.
* Producer surplus changes from CPdBH to CPWF.
* The net gain is BGE+HGF (3)
(3)  (4)  (5)

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