If trade is free, will H be a net importer or exporter of apples? With which country will H trade? 2. The government in H has decided to adopt a non-discriminatory policy that will increase the equi- librium price in Home to P H = 1.2. Solve for the new equilibrium (i.e. determine the quantities demanded and supplied). Will the Home country import/export apples? From which country? 3. The government in H has launched talks with F for the establishment of a customs union. You have been hired to provide advice and determine whether the CU is desirable from the point of view of country H. What is your conclusion (please provide a numerical answer)? Please use the concepts of trade creation and trade diversion to explain your findings. 4. Consider now a slightly different scenario. The equilibrium price in W is still P W = 1, whereas now P F = 1.01. Moroever, the initial non discriminatory policy is such that the equilibrium price in H is P H = 1.4. Once again, the Home country is considering whether to enter or not in a CU with F . What is your advice now? What is the intuition?