a. Table I represents the demand and supply schedules of medicinal products for Belgium, a small nation that is unable to affect the world price. i. Draw the demand and supply schedules of medicinal products for Belgium [preferable on the graph paper provided]. ii. Suppose that Ireland and Germany can supply medicinal products to Belgium at a price of ?10 and ?15 per pack, respectively. Under free trade, which nation exports medicinal products to Belgium? How many medicinal products does Belgium consume, produce, and import?

iii. Assume that Belgium imposes a 100 percent nondiscriminatory ad valorem tariff on its medicinal products imports. Which nation exports medicinal products to Belgium? How many medicinal products will Belgium consume, produce, and import? iv. Assume now that Belgium forms a customs union with Germany. Is the customs union that belgium forms with Germany trade creating, trade diverting, or neither? Provide a reason for your choice of answer. What is the Euro value of trade creation and/or trade creation (if there is any) of customs union's and its overall effect on the welfare of Belgium? v. Assume instead that Belgium forms a customs union with Ireland. Is the customs union that belgium forms with Germany trade creating, trade diverting, or neither? Provide a reason for your choice of answer. What is the Euro value of trade creation and/or trade creation (if there is any) of customs union's and its overall effect on the welfare of Belgium? Table 1: Demand and supply of medicinal products in Belgium