Consider the following: Canada U.S. Rest of the World (ROW) PxC=$8 PXUS=$5 PxR=$4 Tariff restrictions in effect: Suppose Canada imposes a tariff on its imports of good X. Assume that this tariff rate is 50%. (a) Use the appropriate diagram to show the welfare effects on Canada if a free trade agreement (FTA) is formed between Canada and the U.S. (b) Describe the two usual effects that could arise from forming an FTA. Are both effects present in this case? Explain intuitively. (c) Given your answers in (b), can you conclude whether this FTA is beneficial or not beneficial to the world as a whole? Explain.

Consider the following: Canada U.S. Rest of the World (ROW) PxC=$8 PXUS=$5 PxR=$4 Tariff restrictions in effect: Suppose Canada imposes a tariff on its imports of good X. Assume that this tariff rate is 50%. (a) Use the appropriate diagram to show the welfare effects on Canada if a free trade agreement (FTA) is formed between Canada and the U.S. (b) Describe the two usual effects that could arise from forming an FTA. Are both effects present in this case? Explain intuitively. (c) Given your answers in (b), can you conclude whether this FTA is beneficial or not beneficial to the world as a whole? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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