A. (4 marks) Explain, using the gravity model of trade, why the volume of trade between the U.S and the European Union may be higher than the volume of trade between the U.S. and Canada, even though the U.S. and Canada share a border. B. (4 marks) According to the Heckscher-Ohlin model, free trade would lead to an equalization of wage rate internationally. Explain why we do not observe that result in the real world, where, for instance, there is great discrepancy in wage rate between developed and developing countries. C. (4 marks) Why do countries persist in using protectionism even though most economists believe that tariffs and quotas yield welfare losses to consumers?