Illustrate the trade equilibrium of the Melitz model by drawing the Free Entry curve and the Zero Profit Cutoff condition in the appropriate diagram. How does an increase in tariffs affect the two curves and the cutoff firm p"? (Note: You do not need to use any numbers or derive any equations for this diagram. Simply sketch the trade equilibrium and show how it changes.)

Illustrate the trade equilibrium of the Melitz model by drawing the Free Entry curve and the Zero Profit Cutoff condition in the appropriate diagram. How does an increase in tariffs affect the two curves and the cutoff firm p"? (Note: You do not need to use any numbers or derive any equations for this diagram. Simply sketch the trade equilibrium and show how it changes.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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