U.S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $40 each and from Canada at $45 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. Now suppose that the United States forms a free-trade area (NAFTA) with Canada and Mexico. From which country will the United States import fans?

a. China
b. Canada
c. It will import fans from neither China nor Canada.
d. It will import fans from both China and Canada.


Ans: b. Canada

Economics

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