Experiment_1_fistUS

# Experiment_1_fistUS - The Trading Experiment Why do we need...

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The Trading Experiment Why do we need free trade with Mexico? They can’t make anything better than we can. Ross Perot In this experiment there are two types of players: players running an American economy and players running a Mexican economy. Each of you will run an American economy twice and a Mexican economy twice. There are two goods in each economy: tractors (T) and computers (C). Your happiness in any period is equal to T*C, where T is the number of tractors you possess and C is the number of computers. If you are running an American economy you have a “production function” determined by 2T + C = 120. Thus, you can produce any combination of trucks and computers such that 2T + C = 120. (Make sure you choose non-negative levels of T and C). Thus, if you choose to produce 50 trucks, the number of computers you could produce would be C = 120 – 2*50 = 20. Without trading, you total happiness would be T*C = 50*20 = 1000. Now calculate the happiness resulting from other production combination in the table below: (1) (2) (3) Number of Trucks T Number of Computers C = 120 – 2T Happiness T*C 45 40 35 30 25 20

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