Suppose the cost of producing product X (all in perfectly competitive markets) in 3 small countries (A, B, and C) each with different tariff structures that compose the world is as follows (using a common currency): Country A B C Cost 50 40 30 =========== A union (FTA) between country A and country C while keeping a 50 percent tariff on imports of X Select one: worsens country A’s welfare allows country A to import product X from the world’s cheapest source improves country A’s welfare diverts what would have been imported of product X from country B --------------------------------------------- =========== If A imposes a 100 percent tariff on imports of product X: Select one: the price of X in country A will rise the price of X in country B will rise country A will not import product X country A will import from country C
Suppose the cost of producing product X (all in
Country A B C
Cost 50 40 30
===========
A union (FTA) between country A and country C while keeping a 50 percent tariff on imports of X
Select one:
worsens country A’s welfare
allows country A to import product X from the world’s cheapest source
improves country A’s welfare
diverts what would have been imported of product X from country B
---------------------------------------------
===========
If A imposes a 100 percent tariff on imports of product X:
Select one:
the
the price of X in country B will rise
country A will not import product X
country A will import from country C
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