Question 5

The country of Genovia produces and consumes pizza ovens. Below is a graph of

Genovia's demand for pizza ovens. Consumers in Genovia also purchase imported

pizza ovens, from Italy and Romania. The table on the right shows the prices at

which each country can produce

a) To protect domèstic producers, the Genovian government imposes a $1,200

tariff on all imports to the country. What is the price paid by consumers for a

country?

raincoat Pizza oven from each

b) If Genovia enters the European Union, they will not be able to tariff imports

from other member countries. All other trade barriers remain unchanged.

What is the new price paid by consumers for a-raineoat: Pizza oven from each countr

c) What is the net effect of the formation of this free trade area? Label the

graph and show your work. (Make sure you calculate the amount and specify

whether it is a gain or a loss to Genovia).