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
GIVE AND EXPLAIN IN DETAIL,ARGUMENTS GIVEN TO EXPLAIN LEONTIEF''S EMPERICAL FINDINGS ON THE HECKSCHER-OHLIN MODEL OF TRADE.

uses of time series in Indian Economy?

1. Using personal (work) experience or examples found from companies you research or from text book scenarios: a.  Give an example of at least two "conflicting measurements" bei

What mass (in grams) of O2 gas is present in a 36.0 L container at 673.0 K at 23.8 atm O2 pressure if the gas is ideal?

Explain the difference between a change in quantity demanded and a change in demand. Change in quantity demanded" refers to movement with the demand curve.  For instance, if th

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4


Since 1990, real income has increased rapidly , yet the average number of children per family has decline ." Three possible explanations for this process are given below.

Question 1: a) Describe the different types of unemployment that exist. b) Critically examine how monetary policy will be used to deal with inflation. c) Critically deter

What is "high-powered money"?  The "high-powered money" is the similar as monetary base, which is defined, at the minimum, as the sum of the currency in circulation (banknotes