Question
Suppose the world comprises 3 countries A, B, and C. A is a small country, while B and C are large. A's supply and demand
Suppose the world comprises 3 countries A, B, and C. A is a small country, while B and C are large. A's supply and demand for good x are: =100 and =1400100, respectively. The price of good x in countries B and C is =4 and =2. Similarly, A's supply and demand for good y are: =25 and =1205, respectively. The price of good y in countries B and C is =3 and =2, respectively. Country A imposes a tariff of 3 on all imports. a) Find the quantities imported and the prices of good x and y in country A b) Next suppose that countries A and B form a Free Trade Area (FTA). Find the losses or gains of all parties involved within country A from the formation of the FTA. Explain your findings
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