Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose two countries, Canada and Mexico, produce two goods, apparel (A) and motor vehicles (M) using the same factors and production technology. Assume that production
Suppose two countries, Canada and Mexico, produce two goods, apparel (A) and motor vehicles (M) using the same factors and production technology. Assume that production of apparel is labor intensive, and production of motor vehicles is capital intensive. Both capital (K) and labor (L) are free to move between the two industries. Assume that when Canada has 100 units of K and 60 workers, while Mexico has 200 units of capital and 150 workers. a. What commodity would Canada export? Why? b. Draw the production possibility frontiers for the two countries? How are they similar and how do they differ? c. Explain how trade between Canada and Mexico would result in winners and losers? d. Explain how trade can result in the labor to capital ratio rising in both sectors in Canada
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started