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Trade Dynamics and Efficiency Analysis in Global Economy

Explore the impact of transitioning from no-trade to trade at world prices and export subsidies on consumer and producer gains and losses. Analyze efficiency gains and losses in both scenarios. Understand the combined effects for a comprehensive view of economic outcomes.

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Trade Dynamics and Efficiency Analysis in Global Economy

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  1. Mean = 86MS mean = 82PhD mean = 93

  2. Part 1: going from no-trade to trade at world prices P S consumers add consumption, and gainG+H+I+J A Ps=100 D E B C F Pe=200 H G K producersreduce outputand loseG+H I J Pw=100 L N O M D Q Efficiency gain is I + J, Therefore efficiency loss of autarky is -(I+J)

  3. Part 2: going from no-trade to export subsidy P S consumers face higherprices and lose-(B+C) A Ps=100 D E B C F Pe=200 H G K producersincrease outputand gainB+C+D+E I J Pw=100 L N O M D Q Export subsidy costs –(C+D+E+F) Therefore efficiency loss is –(C + F)

  4. Combining: going from world price to export subsidy P S A Ps=100 D E B C F Pe=200 H G K I J Pw=100 L N O M D Q Combined efficiency loss is –(C + F + I + J)

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