4. Effects of a regional trading arrangementConsider a hypothetical world consisting of only three countries: Liechtenstein, Canada, and France. Each country produces grain. Liechtenstein is asmall economy compared to Canada and France and thus cannot influence foreign prices.On the following graph, the supply and demand schedules of Liechtenstein are shown as Such and DLch- Foreign supply schedules of grain areperfectly elastic: Canada is a more efficient supplier of grain than France because its supply price is $1.00 per bushel (Scan), whereas France's supplyprice is $2.00 per bushel (Sp).?10.00SL9.008.007.006.005.004.003.00A2.00Scan1.00612 18 24 3048 54 60Calculate the quantity of bushels Liechtenstein imports when the three nations engage in free trade. Enter this value in the first row of the followingtable. Also indicate which country Liechtenstein imports from.ImportsScenario(Thousands of bushels) Imports from...Free tradeWith tariffWith customs unionAt some point in time, Liechtenstein decides to protect its domestic grain producers and imposes a tariff of $2.00 per bushel of grain on imports fromboth Canada and France. Scan+T and Sp+T represent the after-tariff prices for both countries.In the second row of the previous table, enter the quantity of bushels Liechtenstein imports with the tariff and the country it imports from.Later on, Liechtenstein and France form a customs union as part of a trade liberalization agreement, while the trade between Liechtenstein andCanada continues with the previous terms.In the last row of the previous table, enter the quantity of bushels Liechtenstein imports with the customs union and the country it imports from.Complete the following table by identifying which trade effect of the customs union formation is represented by each of the shaded areas on theprevious graph. Check all that apply.Complete the following table by identifying which trade effect of the customs union formation is represented by each of the shaded areas on theprevious graph. Check all that apply.AreaBEffectAсConsumption effectFavorable production effectTrade creation effectTrade diversion effectTrue or False: Relative to a global tariff, the effect of creating a customs union in Liechtenstein is negative.TrueFalseWelfare effects of a regional trading arrangement are not always static. There are also dynamic gains that influence growth rates over the long run andoffset unfavorable static effects due to trade diversion.Which of the following represent dynamic gains from creating a customs union? Check all that apply.Economies of scaleGreater monopoly power of domestic producersMarket enlargementHigher tariff revenuesPRICE (Dollars)STSC+TS

Given:- Canada Supply price=$1.00 per bushel France supply price=$2.00 per bushel Liechtenstein…

Consider a hypothetical world consisting of only three countries: Liechtenstein, Canada, and France. Each country produces grain. Liechtenstein is a small economy compared to Canada and France and thus cannot influence foreign prices. On the following graph, the supply and demand schedules of Liechtenstein are shown as Such and Duch- Foreign supply schedules of grain are perfectly elastic: Canada is a more efficient supplier of grain than France because its supply price is $1.00 per bushel (Scan), whereas France's supply price is $2.00 per bushel (SP).

Consider a hypothetical world consisting of only three countries: Liechtenstein, Canada, and France. Each country produces grain. Liechtenstein is a small economy compared to Canada and France and thus cannot influence foreign prices. On the following graph, the supply and demand schedules of Liechtenstein are shown as Such and Duch- Foreign supply schedules of grain are perfectly elastic: Canada is a more efficient supplier of grain than France because its supply price is $1.00 per bushel (Scan), whereas France's supply price is $2.00 per bushel (SP).

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter34: Globalization And Protectionism

Section: Chapter Questions

Problem 55P: Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply...

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