Question: Redraw the graph of trade diversion (Figure) with the S′Mex curve intersecting the MUS curve between points A and D.
a. When the United States and Mexico join NAFTA, who supplies auto parts to the United States? Does the United States import a larger quantity of auto parts after NAFTA; that is, does trade creation occur?
b. What is the change in government revenue compared with before NAFTA?
c. Is the United States better off for joining NAFTA?
