In response to the Trump Administration's imposing tariffs on US imports of steel and aluminium, Turkey announced that it would retaliate with tariffs on imports on a wide variety of US exports, including automobiles. As an economic consultant to the Erdogan government, you are asked to explain what economic effects these Turkish tariffs on US imports will imply for the Turkish economy. Please recall that, while Turkey is a cultural giant, for our purposes it is considered a small economy.

a. Begin by showing how free-trade would affect the Turkish economy. Starting from autarky, what would be the effects of opening up to free trade for economic agents in Turkey? What would be the net effect for the economy as a whole? Show and explain.

b. Now suppose that Turkey imposes tariffs on US imports (for simplicity, assume that the United States is the lowest-cost foreign producer of automobiles). How would economic agents be affected and what would be the net effect on the economy? Show and explain.

c. Would a quota have been better than a tariff?