please correct my ppc if it is incorrect. Please help as much as you can
International Trade Problem Set ECO 402 RICARDIAN MODELS Brazil Mexico Sugarcane Bananas Sugarcane Bananas Without Trade Production and Consumption 200 tons 20 tons 160 tons 40 tons With Trade Production Trade Consumption 1. The values in the first row of the table represent the tons of sugarcane and tons of bananas that Brazil and Mexico produce and consume in one week without specialization and trade. With specialization, Brazil can produce either 400 tons of sugarcane or 40 tons of bananas in a week while Mexico can produce either 320 tons of sugarcane or 80 tons of bananas a) Draw the PPF's for Mexico and Brazil with sugarcane on the vertical axis and plot the given consumption points for each. Be sure to label all axes and quantities of goods. Sugarcane 400 400 360 320% 320 280 280 240 240 200 200 160 120 120 80 80 - 40 10 20 do 45 50 60 70 80 90 10 20 3 40 50 6D 10 80 90 MEXICO BRAZILb) Indicate which country has a comparative advantage in each good. Show your ca lcula tians for full credit. Just looking at the graph is not sufficient. c) Suppose the two countries decided to fully specialize and trade 170 tons of sugarcane for 30 tons of bananas. Fill in all the gray boxes in the table using this infomation. d) What are each country's gains from trade? Brazil Mexico Sugarcane Bananas Sugarcane Bananas Gains from Trade e) Suppose instead that there was an offer for these countries to trade at a rate of 3 sugarcane for 1 banana. Would Brazil agree to this trade? Would Mexico? Would the trade occur? 1') Draw a combined PPF for these two countries and indicate the point where they would most likely end up producing. 2. Much of the trade in the 1800s could be described using Ricardian models. Suggest one good in which Japan seemed to have a comparative advantage in the 1800s as well as one in which they seemed to benefit from imports. HECKSCHER-OHLIN MODELS 3. Japan eventually industrialized with a specialization in very labor-intensive manufacturing. Consider a 2 x 2 x 2 Heckscher-Ohlin model with: . Countries: The U.S. (capital abundant) and Japan (labor abundant) in the early 1900s Goods: Textiles (labor-intensive) and machinery (capital-intensive) . . Factors: Capital & labor a. On a single graph, draw these countries' PPF's such that there are diminishing returns to each factor and: . The U.S. PPF includes the points: (12,000 machinery, 0 textiles); (10,000 machinery, 2,000 textiles); (0 machinery 4,000 textiles) The Japanese PPF includes the points: (4,000 machinery, 0 textiles); (3,000 machinery, 4,000 textiles); (0 machinery; 6 textiles) Machinery (1,000s, Capital intensive) Textiles (1,000s, Labor intensive)b. Draw a line showing the prices that these countries would trade at. Write the slope of the line, in terms of the goods exchanged. Can countries consume outside their PPF's like they did in the Ricardian models? c. Since Japan was relatively labor-abundant, then before trade labor would be paid less in Japan than in the US. What would happen to the price of labor in Japan after trade? (1. Labor is usually least mobile factor in Heckscher-Ohlin models, but there was significant lapanese migration to California by this time. All else equal, would trade increase or decrease Japanese immigration to the U.S.? Why? e. Would the U5. produce any textiles in this model? Why would they not specialize completely? INCREASING RETURNS TO SCALE MODELS 4- After WWII. Japan Specialized in labor-intensive manufacturing but eventually began producing many of the same products as the U5. Furthermore, the two countries traded many of these goods with each other. The goods were not identical, but rather were different brands with some different features. Nevertheless these were in the same good categories. Draw an IRTS trade model for Ford cars and Toyota cars between the U.S. and Japan. (Each country could hypothetically produce either brand, but I'll let you guess which one they actually specialized in). a. In the first two grids, draw PPF's for Japan and the US. that show increasing returns to the scale of manufacturing for each brand. Each should contain the following points: (80,000 Toyota, 0 Ford); (20,000 Toyota, 2,000 Ford); (0 Toyota, 80,000 Ford) Ford Ford (10,0005) (10,0005) b. Would it make sense in this model for the US. to produce half Ford and half Toyota cars or just specialize in one? Why or why not? Toyota (10,000s) Ford (10,000s) c. Draw the combined PPFs on the larger grid above. There are technically three points on the graph that might seem efficient. What assumption is made about consumers' utility in these models to pin the solution down to a single point? Circle the point on the graph.5. Finish the supply and demand model for the market for VCR's in the US. during the 19805, by which time Japan had gained a comparative advantage in the industry. If you don't know what a VCR is, ask your parents. a. Add a world price of $40 to the graph. Shade the areas rapresenting consumer surplus, producer surplus, and the gains from trade. Pn'ce ($) $80 $20 Quantity (millions) b. Is there complete specialization in this model? How many VCRs will be produced in the U.S. at the world price? c. What are the gains from trade in this graph. Calculate the actual number. d. How would consumer and producer surplus in this market look different in Japan? Would Japan have gains from trade? 6. By 1990, President Bush had negotiated \"Voluntary Export Restraints\" with Japan- essentially a quotaby which Japanese manufacturers agreed to limit exports to the U.S. to a certain quantity each year. If this quota were set at a quantity of 3 million; what would the deadweight 1055 be in the U.S.? If the U.S. was set on using trade barriers, would Japanese producers have preferred this quota or an equivalent tariff? f. How large of a tariff would the U.S. need to levy on Japanese imports to accomplish the same reduction in imports as the quota :in e)? 6. Japan has moved towards free trade much more slowly than the U.S., but they have signed several agreements in the past 20 years. See Japan's current free trade agreements here: httpswwwbilaterals.orgg?-japanftas- a. What countries trade freely with both the U.S. and Japan? b. What countries trade freely with only Japan (and not the U.S.)
