PS1ans - ECONOMICS 450: INTERNATIONAL TRADE FALL 2011 MARK...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECONOMICS 450: INTERNATIONAL TRADE FALL 2011 MARK MOORE PROBLEM SET 1: SOLUTIONS Chapter 2 1. Australia is very far from everywhere, so transport costs for trade to and from Australia are relatively large. Canada borders the largest economy in the world. 2. Mexico’s trade is large because it is close to a very large economy, so the output over distance term in the gravity model is large. Mexico is also relatively close to Canada. Brazil, on the other hand, is not nearly so close to any large economy, so the output over distance term for its potential trading partners is low. Likewise, Brazilian trade is not dominated by the United States, since Brazil is much farther away from the United States than is Mexico. The North American economies are also bound together in a free trade agreement (NAFTA). Brazil is also in a free trade agreement, but with relatively small economies. 3. No, trade will double. Here’s an example to make it clear.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

PS1ans - ECONOMICS 450: INTERNATIONAL TRADE FALL 2011 MARK...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online