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II. Long Answer Questions (5 points) Suppose i 4Ls Edgei-vor*m box diagral s 1=1 (e} pertains to trade between Mexico and the U.S5. Before the
II. Long Answer Questions (5 points) Suppose i 4Ls Edgei-vor*m box diagral s 1=1 (e} pertains to trade between Mexico and the U.S5. Before the ratification of the North American Free Trade Agreement (NAFTA), the consumption (endowment) of computer chips and textiles in both countries is given by point A. At point A, what is the relative magnitude of the MRS of textiles for computer chips in the U.5. versus Mexico? (i.e., Is MRS of the US greater than Mexico, or vice versa?) What is the economic intuition or interpretation of your answer in part (a)? If the ratification of NAFTA allows trade to bring about an efficient equilibrium, which point in the diagram indicates the level of consumption by each country? Explain At the new equilibrium, how do we know both countries are better off by free trade
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