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Q1. Suppose that, in Case B in table 2.5, the United States exchanges 4W for 4C with the United Kingdom.
(A) In the terms of C, how much does the United States gain?
(B) In the terms of C, how much does the United Kingdom gain?
(C) Elucidate the range for mutually beneficial trade?
(D) How much would each nation gain in terms of C if they exchanged 4W for 6C instead?
Q2. Consider three products: all types of food, all dairy products, and 2% milk. If a tax were to be imposed on one of these items, for which item would the tax be the most efficient (minimizing deadweight loss and maximizing tax revenues)? Use the concept of elasticity in explaining your answer.
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