Suppose the domestic demand of corn in country Y can be represented by the equation QD = 80 – 2P and the domestic supply by QS = -10 + P. The world price of corn is $35. Find the following:
How much are the consumer surplus and producer surplus if the country is in autarky?
How much are the consumer surplus and producer surplus if the country opens up to free trade in corn?
How big is the net gains from free trade?