Now add Foreign, which has a demand curve                                 and a supply curve                                 a. Derive and graph Foreign’s export supply curve and...

Now add Foreign, which has a demand curve

and a supply curve

a. Derive and graph Foreign’s export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.

b. Now allow Foreign and Home to trade with each other, at zero transportation cost. Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade?