This question considers the effect of a Free Trade Agreement (FTA) between the home country and one of two other countries (B and C).The graph below shows the supply and demand in the home country (A) for a good.Country A can import the good from country B (at price PB) or from country C (at price PC).To answer this question, you will need to draw some lines and label some areas using this chart.Use these labels to answer the questions.

a.Using this chart, how much would country A import from country B?How much would country A import from country C?What country with country A trade with?

b.Suppose country A imposes a specific tariff = t on all imports (from country A and from country B).From whom will country A import from?How much will it import?

c.If country A forms a free trade association (FTA) with country B, from whom will it import, and how much?What will be the welfare effects on consumers, producers, and the government of country A of forming the FTA with country B?What is the net effect on country A?

i.In answering this question, start with the situation in part b, tariffs on imports from both countries, and then look at welfare effect from forming the FTA with country B.

ii.In stating the welfare effects, please label the relevant areas in the graph and then give your answer.(For example, your answer should be something like "Consumers gain a+b+c.")

d.Now suppose that instead of forming an FTA with country B, country A forms an FTA with country C.From whom will it import, and how much?What will be the welfare effects on consumers, producers, and the government of country A of forming the FTA with country C?What is the net effect on country A?

i.In answering this question, start with the situation in part b, with tariffs on imports from both countries, and then look at welfare from forming the FTA with country C.

e.Now repeat parts (b) - (d) but start with a smaller tariff (t'

Question 4: This question considers the effect of a Free Trade Agreement (FTA) between the home country and one of two other countries (B and C). The graph below shows the supply and demand in the home country (A) for a good. Country A can import the good from country B (at price PB) or from country C (at price PC). To answer this question, you will need to draw some lines and label some areas using this chart. Use these labels to answer the questions. PC + t PB + t PC PB a. Using this chart, how much would country A import from country B? How much would country A import from country C? What country with country A trade with? b. Suppose country A imposes a specific tariff = t on all imports (from country A and from country B). From whom will country A import from? How much will it import? c. If country A forms a free trade association (FTA) with country B, from whom will it import, and how much? What will be the welfare effects on consumers, producers, and the government of country A of forming the FTA with country B? What is the net effect on country A? i. In answering this question, start with the situation in part b, tariffs on imports from both countries, and then look at welfare effect from forming the FTA with country B. ii. In stating the welfare effects, please label the relevant areas in the graph and then give your answer. (For example, your answer should be something like "Consumers gain atbic") d. Now suppose that instead of forming an FTA with country B, country A forms an FTA with country C. From whom will it import, and how much? What will be the welfare effects on consumers, producers, and the government of country A of forming the FTA with country C? What is the net effect on country A?In answering this question, start with the situation in part b, with tariffs on imports from both countries, and then look at welfare from forming the FTA with country C. e. Now repeat parts (b) - (d) but start with a smaller tariff (t'