In the figure below, AB is the production-possibility curve of Canada. I and I are two of the community indifference curves of Canada. With free trade, the international price ratio is 0.33 bushel of wheat/bale of cotton, and Canada will export: Wheat (bushels) P R 80 A 60 50 0 SIT eighty bushels of wheat. B twenty bushels of wheat. forty bales of cotton. 25 sixty bales of cotton. I₁ Canada 12 65 Co B C1 85 -S Cotton (bales)
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- Consider a 2x2x2 Heckscher-Ohlin model with two countries, Australia and Japan. Australia produces two goods, wine and software. Production of wine is relatively labor intensive, and Australia is relatively capital abundant. a. Using the production possibility frontier diagram, show how Australia can be better off once it engages in trade. Explain your answer. b. Derive the Stopler-Samuelson and Rybczynski theorems, using fully labelled graphs to support your answers. c. Suppose Australia imposes a tariff on importing goods, which raises the relative price of the import-competing sector's output. How does the Stolper-Samuelson theorem predict about changes in factor prices in Australia? Why? Explain your answer. c. Suppose the amount of capital stock increased in Australia. What is the prediction of the Rybczynski theorem on changes in the production amounts of wine and software in Australia (use the production possibility frontier diagram to illustrate your answer, fully label…Q54 Does free trade improve the living standards of all residents of a country? a. No, because the losses in the import-competing industries outweigh the gains from trade in the new export industries. b. Yes, because inefficient import-competing industries are replaced with efficient export industries. c. Probably not. In principle, the net gains from trade could be divided such that every individual is better off, but in practice, some individuals are likely to be worse off. d. No, because the benefits from free trade are only theoretical. e. Yes, definitely, because the gains from trade outweigh the losses in the import-competing industries.Based on the information from the previous graph, the absent international trade surplus is (_________). Part II. When South Africa adjusts its trade policy to allow free trade of limes, the price of one ton of limes in South Africa becomes $800. At this price, (_____)tons of limes will be demanded in South Africa, and(____)tons will be supplied by domestic suppliers. Therefore, South Africa will export(____)tons of limes. Part III. Using the info from previous tasks, complete the following to analyze the welfare effect of allowing free trade: With free trade (dollars) Consumer Surplus= Producer Surplus= WIthout free trade (dollars) Consumer Surplus= Producer Surplus=
- The two products, X and Y, and the two nations, A and B. The following equations provide the production possibility frontier and utility function for each country: A. Does nation A’s economy exhibit constant opportunity cost in production? How about nation B? Support your answer using numeric/quantitative example. B. What is the optimal level of production and consumption in autarky for nation A and nation B which maximizes its community utility? Show full solution for both nations. C. Who has comparative advantage in producing X? How about Y? Support your answer. (5 points)domestic supply and demand of rice is given by the following equations: QD=200–10p QS=20p–100 The world price of rice is pW=8 and is unaffected by the domestic market. (a) Suppose there are no trade barriers for importing or exporting rice. Find the resulting price, quantity purchased by consumers, quantity produced domestically, and the quantity of imports or exports. (b) What is the resulting consumer and producer surplus (domestic)? (c) If all international trade of rice is banned (no imports or exports allowed), what is the resulting domestic price and quantity? (d) What is the resulting CS and PS under the ban? What is the deadweight loss?A small country’s demand curve is given by Q=36-2P and its supply curve is given by Q=4P-12. Assume the world is currently in free trade and that the price under free trade is $4. What is the prohibitive specific import tariff for this economy (i.e. the tariff that would reduce net exports to zero)?Group of answer choices a.6 b.5 c.4 d.8
- Assume that Singapore, a country with an abundance of skilled labor, trades with China, a country with an abundance of unskilled labor. Choose the TRUE statement about the income effects of international trade based on the framework of the Heckscher–Ohlin model. a.International trade reduces the income gap in China only. b.International trade reduces the income gap in Singapore and China. c.International trade increases the income gap in Singapore and China. d.International trade reduces the income gap in Singapore only.Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively. h) Who gains from trade? Who loses? What is the impact if any on the world? (i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.Suppose Home and Foreign countries (H and F) trade two goods, G1 and G2, and each country is populated with 2 workers (workers can split work time between two industries). At home, one worker can produce either 1 units of G1 or 2 units of G2 in one day. For foreign worker it takes 0.5 days to produce one unit of G1 and 0.2 days to produce one unit of G2. (a) Calculate the opportunity costs of producing G1 in each country. (b) Calculate the world relative supply of G1 at the relative price p1/p2 = 2.2
- 61.Comparative advantage in production of the good measured on the horizontal axis is identified with a straight-line production possibilities frontier that has a slope that is A)larger in magnitude (or absolute value). B)smaller in magnitude (or absolute value). C)positive. D)larger in magnitude (or absolute value.) and positive. 62.A quota that limits U.S. imports of cane sugar A)harmsU.S. sugar consumers. B)helpsU.S. cane sugar producers. C)helpsU.S. corn syrup (sweetener) producers. D)all of the options are correct. 63.A quota that limits U.S. imports of cane sugar A)harmsU.S. consumers more than it helps U.S. producers. B)helpsU.S. producers more than it hurts U.S. consumers. C)harms foreign producers more than it helps U.S. producers. D)helps both U.S. consumers and U.S. producers at the expense of foreign producers. 64.Of approximately 140 million jobs in the U.S., each year approximately A)31 million are eliminated and 30 million are created.…Please help, with explanations! 1. In the Pure Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then A. Both owners of K and owners of A will benefit. B. Owners of A will benefit. C. Owners of K will benefit. D. Neither owners of K nor owners of A will benefit. 2. In a Mixed Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then A. Both owners of K and owners of A will benefit. B. Owners of A will benefit. C. Owners of K will benefit. D. Neither owners of K nor owners of A will benefit.Answer the question using the 3 -step approach 7. What happens to the domestic market when suppliers start to gain comparative advantage and export cars. Who enjoys the economic surplus and who lose their share of the surplus?