International economics question 1, 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 6:24:35 PM | Location : United States







Related Discussions:- International economics question 1, Assignment Help, Ask Question on International economics question 1, Get Answer, Expert's Help, International economics question 1 Discussions

Write discussion on International economics question 1
Your posts are moderated
Related Questions

What are the "three basic economic questions" that economists often address when examining how much economic output is formed? The three basic questions are: a) what is prod

what happens when price is fix and there is a change of the supply and demand curve

Illustrate the roles of mathematics in modern economics? Roles of Mathematics in Modern Economics: Mathematics has become a significant tool into modern economics. Mostly

In an industry with two firms, represent the outputs for these single product firms as q 1 and q 2 . The two firms decide to form a cartel and set their levels of output to maxim

wHEN WAGE IS $6.05, HOW MANY HOURS ARE WORKED A WEEK?

Floating exchange rates There are two basic systems that can be used to determine the exchange rate between one country's currency and another's: a floating exchange rates (al


how do I explain the hicksian and slutsky theory of consumer behaviour in an examination

What is development economics? Traditional economics studies the allowance of scarce resources among alternative uses. Development economics seems at the economic, politica