Homework 4Econ 331: International TradeConsider a world with two countries, H and F. H is the importer of a homogeneous good produced by perfectly competitive firms and F is the exporter (soboth...

Homework 4Econ 331: International TradeConsider a world with two countries, H and F. H is the importer of a homogeneous good produced by perfectly competitive firms and F is the exporter (soboth countries are “large”).1. Draw 3 graphs, one for H and one for F and one for the world market, thatillustrate the free trade equilibrium. Make sure that the graphs includequantities demanded and supplied at the free trade price. Make clear howmuch H imports and how much F exports.2. Suppose that H imposes a tariff of size t on imports from F. Show onone graph how this tariff affects consumer surplus, producer surplus andgovernment revenue in H. Draw the graph so that H is better off becauseof the tariff and make clear why this is so. Show on a separate graph, howthe tariff affects welfare in F. Indicate how consumer surplus and producersurplus in F has changed3. Now suppose instead that F puts a tax on its exports to H (for every unitsold abroad, the exporter has to pay a tax of T). How does the export taxaffect the price paid by consumers and producers in H? Explain.4. How does the F’s export tax affect welfare in F? Show using a diagramthat makes clear what has happened to F’s exports, its consumer surplus,its producer surplus, and government revenue. 1