154F8CBF 3. Trage creation ana traae aiversion Suppose that with free trade, the

Question

154F8CBF 3. Trage creation ana traae aiversion Suppose that with free trade, the cost to the United States of importing a keyboard from Mexico is $13, and the cost of importing a keyboard from China is $11. A keyboard produced in the United States costs $18. Suppose further that before NAFTA, the United States maintained a tariff of 30% against all keyboard imports. Then, under NAFTA, all tariffs between Mexico and the United States are removed, while the tariff against im China remains in effect. Assume that the tariff does not affect the world price of keyboards. ports from Before NAFTA, the United States imported keyboards from: O China O Mexico O Both Mexico and China O Neither Mexico nor China Under NAFTA, the United States imports keyboards from: O Both Mexico and China O Mexico O Neither Mexico nor China O China , and the U.S. government As a result of NAFTA, consumers in the United States and China tariff revenue. Mexico a Ask me

Explanation / Answer

Before NAFTA, the United States used to import keyboards from China.Because it would cost less than importing them from Mexico even with the tariff.

Under NAFTA, the United States will import keyboards from Mexico. With the tariff, the Chinese keyboards would cost $14.3 and the keyboards from Mexico would cost only $13 as the tariff is removed under the treaty.

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