What level of production of cars would you recommend

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Reference no: EM132852336

Assignment: Trade

Absolute and Comparative Advantage

1 Fill in the charts below with values based on the two Production Possibilities Frontiers above.

Motor Vehicle Production in the United States (in millions)
Cars	Trucks
	0
4
0

Motor Vehicle Production in Mexico (in millions)
Cars	Trucks
		0
		2
0

2 Assume the U.S. and Mexico do not trade and that both countries need some combination of cars and trucks. Look at the production possibilities frontier for both countries. What level of production of cars and trucks would you recommend for each country if they did not trade? Assume both cars and trucks are needed. (Look at a few different points to evaluate.). Provide at least a one sentence explanation of why you chose the point you chose for each country.

3 Which country has the absolute advantage in producing cars?

4 Which country has the absolute advantage in producing trucks?

5 Which country has the comparative advantage in producing cars?

6 Which country has the comparative advantage in producing trucks?

7 Should these two countries trade? Why or Why not?

8 What would you suggest each of these countries produce? Explain your answer. (Make sure to include the number of cars and trucks each country should produce.)

Reference no: EM132852336

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