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Question 3 Refer to the diagram below to answer this question. Mexico Chi I s 0 U.S. - ' Textiles contract curvg/ f/ 4/,- OUs
Question 3 Refer to the diagram below to answer this question. Mexico Chi I s 0 U.S. -" ' Textiles contract curvg/ f/ 4/,\"- OUs U.S. Chips Suppose the Edgeworth box diagram above pertains to trade between Mexico and the U.S. Before the ratication of the North American Free Trade Agreement (NAFTA), the consumption of computer chips and textiles in both countries is given by point A. At point A, what is true regarding the relative price of computer chips in the U.S. versus Mexico? If the ratication of NAFTA allows trade to bring about the efcient equilibrium, which point in the diagram indicates the level of consumption by each country? At the new equilibrium, what has happened to the price of chips in the U.S.? How do we know both countries are better off by ee trade
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