The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively.

Figure 8.2. Portugal's Steel Market

-Consider Figure 8.2.As a result of a customs union formed with France, Portugal's overall welfare rises by $900.

Question

The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively.

Figure 8.2. Portugal's Steel Market

-Consider Figure 8.2.As a result of a customs union formed with France, Portugal's overall welfare rises by $900.

Quizplus · Accepted Answer

The overall welfare impact of a customs union on a country like Portugal depends on various factors such as the structure of tariffs before and after the union, the trade volumes, and the changes in terms of trade. Without specific details on these factors, it's not possible to definitively state the impact on Portugal's welfare.

The Figure Below Depicts the Steel Market for Portugal, a Small