6. The United States, France, and Italy are among the world’s largest producers. To answer the following questions, assume that their markets are monopolistically competitive, and use the gravity equation with B = 93 and n = 1.25.

GDP in 2009 Distance from the

($ billions) United States (miles)

France 2,635 5,544 Italy 2,090 6,229 United States 14,270 —

a. Using the gravity equation, compare the expected level of trade between the United States and France and between the United States and Italy.

b. The distance between Paris and Rome is 694 miles. Would you expect more French trade with Italy or with the United States? Explain what variable (i.e., country size or distance)

drives your result.