Information for questions 10-13 The world is made of five co…
Information for questions 10-13 The world is made of five countries, A, B, C, D and E. There are no transportation costs among these countries, just (possibly) tariffs. Countries A and B are considering forming a Regional Trade Agreement (RTA). If they do so, then they will have no tariffs against each other’s goods, but will keep their tariffs against countries C, D, and E. The following table lists the costs of production per automobile in the five countries. Also shown are country A’s tariffs imposed on imports of automobiles from other countries, before and after any RTA is formed. Cost of production (thousands of $/car) A’s tariff (thousands of $/car) before RTA A’s tariff (thousands of $/car) after RTA Country A 22 — — Country B 15 5 0 Country C 10 5 5 Country D 11 4 4 Country E 18 4 4 Before forming an RTA, in order to conform with the “most favored nation” rule, country A should lower its tariffs on imports from: