Question 4 Figure 1 depicts the organic chemicals market for a small nation, Belgium. Assume that Germany and Switzerland can supply organic chemicals to Belgium at a price of E200 and E300 per metric ton respectively. SBelgium 900 800 700 600 500 400 300 Sswitzerland 200 SGermany 100 DBelgium 5 10 15 20 25 30 35 40 45 thousand of metric ton of organic chemical Figure 1 a. Refer to Figure 1 and answer the following questions (Note: show your working) i . With free trade, will Belgium produce the organic chemicals domestically or import it from Germany or Switzerland? [3 marks] ii. If Belgium levies a 100 percent nondiscriminatory tariff on its steel imports, will Belgium produce the organic chemicals domestically or import it from Germany or Switzerland? [3 marks] If Belgium forms a customs union with Switzerland, will Belgium produce the organic chemicals domestically or import it from Germany or Switzerland? [3 marks] iv . Is the customs union that Belgium forms with Switzerland trade creating, trade diverting, or neither? Explain your answers. [5 marks V. Calculate the net welfare effects of the customs union that Belgium forms with Switzerland. [5 marks] b. "A trade-diverting customs union will lead to a net welfare gain for the nation joining the union." Do you agree or disagree with the above statement? Why? [Diagram is not required] [6 marks]