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P HOME P FOREIGN S X 4: TRADE WARS: Now suppose the exporter imposes a 2$ tariff on exports and the importer simultaneously imposes a
P HOME P FOREIGN S X 4: TRADE WARS: Now suppose the exporter imposes a 2$ tariff on exports and the importer simultaneously imposes a 2$ tariff at the same time. a) What happens to free-trade equilibrium world price? What about output, consumption, and imports/exports in each country. Show in the ED-ES diagram and explain. b) Does any of the countries gain by this? Explain fully c) Given your results from all of the above, would both countries be better off by simply sticking to free trade? P HOME P FOREIGN S X 4: TRADE WARS: Now suppose the exporter imposes a 2$ tariff on exports and the importer simultaneously imposes a 2$ tariff at the same time. a) What happens to free-trade equilibrium world price? What about output, consumption, and imports/exports in each country. Show in the ED-ES diagram and explain. b) Does any of the countries gain by this? Explain fully c) Given your results from all of the above, would both countries be better off by simply sticking to free trade
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