Suppose that a domestic monopolist in a small country faces demand of P = 200 - Q and has a constant MC of $40 per unit.
I. Calculate the value of consumer and producer surplus in autarky.
II. Now suppose that trade occurs with a world price of $50. Calculate the value of consumer and producer surplus.
III. By how much did the monopolist's profits fall as a result of the opening of trade?

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The Answer of Suppose that a domestic monopolist in a small country faces demand of P = 200 - Q and has a constant MC of $40 per unit.
I. Calculate the value of consumer and producer surplus in autarky.
II. Now suppose that trade occurs with a world price of $50. Calculate the value of consumer and producer surplus.
III. By how much did the monopolist's profits fall as a result of the opening of trade?

Suppose That a Domestic Monopolist in a Small Country Faces