0.0
1.0
2.0
3.0
4.0
5D
ensi
ty
60 70 80 90 100
AGEC 640, Fall 2013 Midterm Results
Mean = 86MS mean = 82PhD mean = 93
S
D
Pw=100
Ps=100
Pe=200
P
Q
A
B
G
L
M
CD
J
E
HI
F
N O
K
Part 1: going from no-trade to trade at world prices
consumers add consumption, and gainG+H+I+J
producersreduce outputand loseG+H
Efficiency gain is I + J,Therefore efficiency loss of autarky is -(I+J)
S
D
Pw=100
Ps=100
Pe=200
P
Q
A
B
G
L
M
CD
J
E
HI
F
N O
K
Part 2: going from no-trade to export subsidy
consumers face higherprices and lose-(B+C)
producersincrease outputand gainB+C+D+E
Export subsidy costs –(C+D+E+F) Therefore efficiency loss is –(C + F)
S
D
Pw=100
Ps=100
Pe=200
P
Q
A
B
G
L
M
CD
J
E
HI
F
N O
K
Combining: going from world price to export subsidy
Combined efficiency loss is –(C + F + I + J)
