Describe the trade triangles, Microeconomics

Steel and aluminum production
Steel Canada 500, France 1200
Aluminum Canada 1500, France 800
The maximum amount of steel or aluminum that Canada and France can produce if they fully use all the factors of production at thier disposal with the best technology available to them (hypothetically) is listed above.
Assume that production occurs under constant-cost conditions. On graph paper,draw the production possibilities schedules for Canada and France; locate aluminum on the horizontal axis and steel on the vertical axis of each countries graph. In the absence of trade, assume that Canada produces and consumes 600 tons of aluminum and 300 tons of steel and that France produces and consumes 400 tons of aluminum and 600 tons of steel. Denote these autarky points on each nation''s production possibility schedule.
a. Determine the MRT of steel into aluminum for each nation. According to the principle of comparative advantage, should the two nations specialize? If so, which product should each country produce?Will the extent of specialization be complete or partial? Denote each nation''s specialization point on its production possibilities schedule. Compared to the output of steel and aluminum that occurs in the absence of trade, does specialization yeild increases in output? If so, by how much?
b. Within what limits will the terms of trade lie if specialization and trade occur? Suppose Canada and France agree to a terms-of-trade ratio of 1:1 (1 ton od steel = 1 ton of aluminum). Draw the terms-of-trade line in the diagram of each nation. Assuming that 500 tons of steel are traded for 500 tons of aluminum, are Canadian consumers better off as a result of trade? If so, by how much? How about French consumers?
c. Describe the trade triangles for Canada and France.
Posted Date: 5/12/2012 12:14:59 PM | Location : United States







Related Discussions:- Describe the trade triangles, Assignment Help, Ask Question on Describe the trade triangles, Get Answer, Expert's Help, Describe the trade triangles Discussions

Write discussion on Describe the trade triangles
Your posts are moderated
Related Questions
What would be a factor that would make the prospects hopeful for overcoming the demand for resources in the future

how can a consumer get maximum Equlbrim

The Acme Bakery in the seaside resort town of Malvino sells freshly baked bread to two categories of consumers: residents of the town and tourists. The weekly demand from touris

#questioSuppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in au

Modern economy: It explored the role of money in every modern economy.The chapter also revealed that it is necessary for the government to ensure consistency between the quant

How might one measure differences in living standards between less developed and developed countries?  This is a very wide question where any clear and relevant calculate shoul

if coast of good A fall by Rs.1 & coast of good B increases by 1 Rs. what will be the effect on budget line

Methods of Forecasting The various methods of forecasting demand may be grouped under the followings categories: Opinion Polling Method: In this method the opinion

The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded. What would answer be

1) The $787 billion stimulus package, "American Recovery and Reinvestment Act" passed in Winter 2009 contained a mix of tax rebates, tax credits and increases in various transfer p