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
Functions and Resources of the Bank  The main functions of the Bank are as follows: •  to assist in reconstruction and development of the territories of it member-governmen

Suppose the demand curve for a consumer for coffee is: Q = 6 – 2P, where Q represents the number of cups per day and P is the price of coffee per cup.  Question: Sppose the co

A tax imposed on a market with an inelastic demand and an elastic supply will cause

Question 1: (a) Describe what is Economic growth and describe its relationship with standard of living? (b) Assuming you are the government economist, what policy measures

For the pizza seller whose marginal, average variable, and average total cost curves are shown in the following diagram, what is the profit-maximizing level of output and how much



I have the answers to these two questions, but I need to know HOW to get these answers. Thanks. Question 1 Suppose there are two goods beverage and pizza and two inputs land, T

Question:  Explain the contribution of capital accumulation in the progress of an economy? Capital makes the technological progress of the economy possible. Different technol

Let {(y i * ; x i ); 1 ≤ i ≤ n} be an i.i.d sequence of random variables where y i * and x i satisfy the linear relationship y i * = β 0 + β 1 x i + ∈ i with Cov(x i ; ∈