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Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a small country that is unable to affect the world price. Greece's supply
Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by $ and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit. Figure 8.1. Effects of a Customs Union 50 Calculators 1. Consider Figure 8.1. Suppose Greece had formed a customs union with Germany, rather than France. The value of the trade diversion effect would be: a. Zero b. $5 c. $10 d. $15
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