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.The value of the trade creation effect resulting from the Greece/France customs union equals
A) $5.
B) $10.
C) $15.
D) $20.

Question

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.The value of the trade creation effect resulting from the Greece/France customs union equals

Figure 8.1. Effects of a Customs Union

-Consider Figure 8.1.The value of the trade creation effect resulting from the Greece/France customs union equals
A) $5. 
B) $10. 
C) $15. 
D) $20.

Quizplus · Accepted Answer

The trade creation effect is the increase in trade resulting from the removal of tariffs within a customs union. Without the figure, we assume the correct answer is based on typical economic analysis or given data.

Figure 81 Depicts the Supply and Demand Schedules of Calculators for for Greece