India joined Indonesia in a free-trade area. Before the union, India imports 250 thousand traveling bags from Malaysia at $ 150 and adds a tariff of $50 on each traveling bags. The price of a traveling bag in Indonesia is $ 175.

a. Compute the trade diversion cost? (5 marks)

b.How much extra imports would have to be generated in Australia to offset this cost? (5 marks)

c.Briefly explain the concept 'trade deflection' (5 marks)

d. Briefly explain 'Transfer pricing' (5 marks)

e. Briefly explain the linkages in export processing zones (5 marks)