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
#questASSIGNMENT #1 The demand function for Product X is given by: Qdx = 80- 2Px- 0.05P²x -0.2Py + 4Pz + 0.01I+ 2A Where: Px Price of good X $120.00 Py Price of related good y $100

For each of the following scenarios, you use a SS & DD diagram to demonstrate the effect of a given shock on equilibrium price and quantity in specified competitive market. Explain

Determine The Rule of Divergence in General Though even if attention is confined to non-communist-ruled economies there still has been huge divergence in relative output per w

Mixed Economic System and how can this system solve the economic problem, with example?

what is diffusion and effusion of gases? Describe Graham''s law of diffusion, effusion. Diffusion of gases While during two gases are brought together they mix with each other in

TRADE AND ECONOMIC GROWTH : Foreign trade has worked as an 'engine of growth' in the past (witness Great Britain in the 19th century and Japan in the 20th, besides others), an

Equilibrium Exchange Rate: The theory of exchange rate determination explains how demand and supply of foreignexchange interact and jointly determine the equilibrium exchange

how to write an half equation

I am risk averse, and trying to maximize my expected value of c0, 5, where c is my fortune. I have 50.000 in cash, and also art with a value of 200.000 which I keep in my basement.

Assume the banking system contains: Total Reserves                         $ 80 billion Transactions Deposited          $800 billion Cash held by public                 $1