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
Proportion of Workers in Organised and Unorganised Workers: Increasing share of employment in unorganised sector reflect the deterioration in the quality of employment because

As there are natural monopoly market situations it is in the public interestto permit monopolies, but traditionally in the United States they are regulated with respect to price.

The prevention of major swings in economic activity can be handled most easily by the

Surplus The surplus is a condition under that supply for a good or service is in excess of the demand for that good or service. When this happens, there is commonly a reduction

Ask question #Minimum 100 areanycurrentsubsidyorwelfareissueddiscussedoraddressedinparliamentwords accepted#

In a competitive market, the market demand is Qd = 150 - 5P and the market supply is Qs = 5P - 10. As a result of a price ceiling imposed at $14, the new consumer surplus and produ

explain normal profits

Elimination of waste - Stock Management Here is a definition of the elimination of waste: Anything other than the minimum amount of equipment, material, parts and working t

project on visit to village for agriculturebased project

How does an increase in the size of a future payment affect the present value of a future payment