a. Derive Home’s import demand and Foreign’s supply schedule and prices of wheat in absence of trade. b. Now, Home and Foreign opens up to trade. Find the equilibrium under free trade. What is the world price of wheat and what is the volume of trade? c. Suppose Home imposes a specific tariff of 0.5 on wheat imports. Determine the effect of tariff on the price of wheat in each country, the quantity supplied and demanded in each country and volume of trade. d. Determine the effect of tariff on the welfare of Home consumers, Home government and Home import-competing producers.

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