Homeland is about to join Furrinerland in a free-trade area

| April 14, 2018

Homeland is about to join Furrinerland in a free-trade area. Before the union, Homeland imports 10 million DVD recorders from the outside-world market at $100 and adds a tariff of $30 on each recorder. It takes $110 to produce each DVD recorder in Furrinerland.a. Once the free-trade area is formed, what will be the cost to Homeland of the DVD recorder trade diverted to Furrinerland?b. How much extra imports would have to be demanded by Homeland to offset this trade-diversion cost?Suppose that the United States currently imports 1.0 million pairs of shoes from China at $20 each. With a 50 percent tariff, the consumer price in the United States is $30. The price of shoes in Mexico is $25. Suppose that, as a result of NAFTA, the United States imports 1.2 million pairs of shoes from Mexico and none from China. What are the gains and losses to U.S. consumers, U.S. producers, the U.S. government, and the world as a whole?pug21774_fm_i-xxviii.inddWhich of the following trade policy moves is most certain to bring gains to the world as a whole: (a) imposing a countervailing duty against an existing foreign export sub- sidy, (b) forming a customs union in place of a set of tariffs equally applied to imports from all countries, or (c) levying an antidumping import tariff?

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