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The following table shows the amount of textile and auto one unit of labor can produce in Mexico and the United States. Textile Auto Mexico
The following table shows the amount of textile and auto one unit of labor can produce in Mexico and the United States.
Textile Auto
Mexico 12 2
United States 16 4
Suppose the international price is set at 1 auto:5 textile and Mexico decides to completely specialize at producing the product in which it has a comparative advantage. How would the above graph change? Use the graph to show the gains from trade and the export and import quantities. For each unit of itsimportgood, how much is Mexico' gain (measured in terms of the other good)?
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