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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
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. P S PC +t PB +t PC PB D DAB Q 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? Country A would have a high demand for the product from Country B since the price is low. Country A however would be required to demand more from Country C since there is a greater supply. Country A would import less of the product from Country C since it has a higher price than country 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? Country A would import from 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. P S PC +t PB +t PC PB D DAB Q 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? Country A would have a high demand for the product from Country B since the price is low. Country A however would be required to demand more from Country C since there is a greater supply. Country A would import less of the product from Country C since it has a higher price than country 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? Country A would import from
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