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Question33 Not yet answered Marked out of 11.00 Flag question Question text The following table is a hypothetical product possibility curves for Canada and Mexico.
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The following table is a hypothetical product possibility curves for Canada and Mexico. Before trade Canada is at point C and Mexico is at point B on their respective PPC curves.
ABCDEFCanadaDairy Foods5004003002001000Bicycles050100150200250MexicoDairy Foods100806040200Bicycles050100150200250
In Canada the opportunity cost of 1 Bicycle isAnswer
0.5
0.3
2.0
4.0
Dairy Foods
In Mexico the opportunity cost of 1 Dairy food isAnswer
0.50
2.00
2.50
3.33
Bicycles
Canada has a comparative advantage inAnswer
Dairy Foods
Bicycles
and therefore should importAnswer
Dairy Foods
Bicycles
.
Assume each country specializes in their area of comparative advantage.
For trade to occur, the limits of the terms of trade for 1 unit of Dairy food will beAnswer
0.32 to 2
0.5 to 2.5
0.333 to 0.625
1.6 and 3.0
Bicycles.
The countries decide to trade100 units of Dairy Foods for 150 units of Bicycles. Fill in the table to answer the remaining questions.
Country/Product
Before Trade
(Self Sufficiency)
Specialization
Trade
(Import/Export)
After Trade
Gains From Trade
CanadaDairy Foods300Answer
0
300
500
Answer
-100
-150
100
150
Answer
100
200
300
400
Answer
0
20
50
100
150
Bicycles100Answer
0
100
250
Answer
-100
-150
100
150
Answer
0
100
150
200
Answer
0
20
50
100
150
MexicoDairy Foods80Answer
0
80
100
Answer
-100
-150
100
150
Answer
0
60
100
150
Answer
0
20
50
100
150
Bicycles50Answer
0
50
250
Answer
-100
-150
100
150
Answer
0
50
100
150
Answer
0
20
50
100
150
After trade, in theCanadianDairy Foods market producers will be happy because theyAnswer
produce less
produce more
consume more
consume less
at aAnswer
lower price
same price
higher price
Canada may impose a tariff on Mexican imports to
help pay for health costs of Canadians vacationing in Mexico
address health and safety concerns from Mexican products
Impose the use of the Canada dollar in the Mexican economy
increase drug trafficking between the two countries
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International Economics Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
9th Edition
978-0132146654, 0132146657, 9780273754091, 978-0273754206
