(Table: Demand and Supply for Gloves) The United States can also
Import gloves from China at $4 per pair and from Mexico at $5 per
Pair.Currently, the United States imposes a specific tariff of $2 on its
Glove imports.Suppose instead that the United States negotiated a
Freetrade agreement with China.Will the United States be better off
Or worse off as a result of its trade in gloves in the freetrade area
With China?

Question

(Table: Demand and Supply for Gloves) The United States can also
Import gloves from China at $4 per pair and from Mexico at $5 per
Pair.Currently, the United States imposes a specific tariff of $2 on its
Glove imports.Suppose instead that the United States negotiated a
Free­trade agreement with China.Will the United States be better off
Or worse off as a result of its trade in gloves in the free­trade area
With China?

Quizplus · Accepted Answer

With a free-trade agreement with China, the United States can import gloves from China at $4 per pair without the $2 tariff. Therefore, the price of gloves in the United States would decrease, resulting in a decrease in the quantity supplied by domestic producers and an increase in the quantity demanded by consumers. However, there are no trade diversion losses because imports from China are already cheaper than imports from Mexico. As a result, the United States is better off with free trade in gloves with China.

(Table: Demand and Supply for Gloves) the United States Can