Demanded by homeland to offset this trade-diversion cost

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Reference no: EM131112597

Homeland is about to join Furrinerland in a free-trade area. Before the union, Homeland imports 10 million DVD recorders from the outside world market at $100 and adds a tariff of $30 on each recorder. It takes $110 to produce each DVD recorder in Furrinerland

a) once the free trade area is formed, what will be the cost to Homeland of the DVD recorder trade diverted to Furrinerland?

b) How much extra imports would hae to be demanded by Homeland to offset this trade-diversion cost?

Reference no: EM131112597

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