Figure 81 Depicts the Supply and Demand Schedules of Calculators for for Greece

question 139

Multiple Choice

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.

Figure 8.1. Effects of a Customs Union

-Consider Figure 8.1.The value of the trade diversion effect, resulting from the Greece/France customs union, equals

• A) $5.
• B) $10.
• C) $15.
• D) $20.

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Definitions:

Money Outflow

The movement of money out of a particular country, market, or economic sector, often to foreign countries or investments.

Balance of Payments

A comprehensive record of all monetary transactions between a country and the rest of the world over a specific period, including trade, financial transfers, and investments.

Current Account

The section of a country's balance of payments that records the imports and exports of goods and services, net earnings from abroad, and net transfer payments over a period of time.

Goods Deficit

A situation where the value of a country's imports of goods exceeds the value of its exports of goods.