Before the North American Free Trade Agreement (NAFTA) gradually eliminated import tariffs on goods, the autarky price

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Before the North American Free Trade Agreement (NAFTA) gradually eliminated import tariffs on goods, the autarky price of tomatoes in Mexico was below the world price and in Canada was above the world price. Similarly, the autarky price of poultry in Mexico was above the world price and in Canada was below the world price. Draw diagrams with domestic supply and demand curves for each country and each of the two goods. (You will need to draw four diagrams, total.) As a result of NAFTA, Canada now imports tomatoes from Mexico and Canada now exports poultry to Mexico. How would you expect the following groups to be affected?

a. Mexican and Canadian consumers of tomatoes. Illustrate the effect on consumer surplus in your diagram.

b. Mexican and Canadian producers of tomatoes. Illustrate the effect on producer surplus in your diagram.

c. Mexican and Canadian tomato workers.

d. Mexican and Canadian consumers of poultry. Illustrate the effect on consumer surplus in your diagram.

e. Mexican and Canadian producers of poultry. Illustrate the effect on producer surplus in your diagram.

f. Mexican and Canadian poultry workers.

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Macroeconomics

ISBN: 978-1319120054

3rd Canadian edition

Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson

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