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Assume a world of three countries USA, Mexico and Canada and only one good, corn. USA Mexico Canada Corn Price 8$ 7$ 5$ a) If we assume that USA is our home country and there is free trade, will there

Assume a world of three countries USA, Mexico and Canada and only one good, corn. USA Mexico Canada Corn Price 8$ 7$ 5$ a) If we assume that USA is our home country and there is free trade, will there be any corn trade between USA and other countries? (10 pts.) b) Consider only the trade between USA and Canada. If USA starts to impose an import tariff of 50% on corn, will this policy have any effects on trade between Canada and USA? Show the effects on a graph, if any. (15 pts.) c) Show the welfare effects of this import tariff on consumers, producers and government with a properly labelled graph. (15 pts.) d) Do you think that it is economically rational for USA to implement this tariff?

Apr 19 2021 View more View Less

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