I NEED ANSWER FOR NUMBER THREE ONLY Problem #3: Use the data from Problem #2 to
ID: 1112342 • Letter: I
Question
I NEED ANSWER FOR NUMBER THREE ONLY
Problem #3: Use the data from Problem #2 to answer the following questions. custom union with Nation C If Nation A now form a a. Nation A will consume how much of Commodity b. Nation A will domestically produce how much of Commodity c. Nation A will import how much from Nation C? d. Nation A will collect how much tariff revenue? X? x?-- e. Shade the areas in the above diagram of Problem #2 that represent the net st welfare gain for Nation A by forming a custom union with Nation C. f. Brie ly explain the reasons for the net static welfare gain in Nation A.Explanation / Answer
a. 500 units.
When A forms a customs union with C, the price of good X in C is much lower than in A, so at price $0.50, the consumers would consume 500 units.
b. At price $0.50, only 100 units would be domestically produced by the sellers.
c. The difference between the demand and supply would be fulfilled by the imports, of 500 - 100 or 400 units.
d. If there is 100% tariff on imports of goods, then tariff inclusive price from country C would be = 0.5 + 100% * 0.50 or $1.
The imports =400 units.
So tariff revenue = 400 * 1 = $400.
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