Multiple Choice
Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.
Figure 8.1. Effects of a Customs Union
-Consider Figure 8.1.Comparing the trade creation and trade diversion effects, the impact of the Greece/France customs union on the welfare of Greece is
A) a $5 increase in economic welfare.
B) a $10 increase in economic welfare.
C) a $5 decrease in economic welfare.
D) no change in economic welfare.
Correct Answer:
Verified
Correct Answer:
Verified
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