Your business provides CDs for free to customers who pay for the English courses that you offer in Mexico. You consider the idea of mass production of the CDs in the U.S., so that you can sell (export) them to distributors or to retail stores throughout Mexico. You would price the CDs in dollars when exporting them. The CDs are not as effective without the teaching, but can be useful to individuals who want to learn the basics of the English language.
a. If you pursue this idea, explain how the factors that affect international trade flows (identified in Chapter 2) could affect the Mexican demand for your CDs. Which of these factors would likely have the largest impact on the Mexican demand for your CDs? What other factors would affect the Mexican demand for the CDs?
b. If you believe the Mexican government would impose a tariff on the CDs exported to Mexico, how could you still execute this business idea at a relatively low cost while avoiding the tariff? Describe any disadvantages of this idea that would avoid the tariff.