Question
Below table shows the costs incurred in automotive production in Turkey, European Union and Japan and the taxes imposed by the Turkish government on imported
Below table shows the costs incurred in automotive production in Turkey, European Union and Japan and the taxes imposed by the Turkish government on imported automotives in US $ .
TurkeyE. UnionJapan
Production Cost 1200800 700
Import tax per car- 250 250
a. Under these conditions, will Turkey produce automotives domestically, or import from European Union or Japan?
b. If Turkey and European Union form a customs union and set the common external tariff as $250 per car, will this customs union be trade creating or trade diverting? Explain your answer?
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Economics of Money, Banking and Financial Markets
Authors: Frederic S. Mishkin
9th Edition
978-0321607751, 9780321599797, 321607759, 0321599799, 978-0321598905
