CA Linear Transofrmation Schedule

CA Linear Transofrmation Schedule - Econ 306 International...

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Unformatted text preview: Econ 306, International Trade. CAM Instructor: 1. A. Freeman Name: I Trading Under Constant Cost (Linear Transformation Schedule) 1 Example Output per labor hour Output per labor hour Wheat (tons Auto I!_‘- Assume that each nation has a total abor supply of 10,) a. Draw the PPC for the US and Canada. Let wheat be on the vertical (Y) axis and auto on the horizontal (X) axis. Assume that the US prc-trade (autarky) consumption point is 25 autos and 125 tons of wheat, while Canada‘s pre-trade (antarky) consumption point is 15 autos and 120 tons of wheat. Label these points on the graph as A and A‘, respectively? WVtmi§ \ 0 child CV 2143 1‘30 ‘30 -_.-r LLB - ED b. Find the MRT of wheat into auto (MRT w. A) for US. and Canada? What is the producing one more auto for US an anada?_W_hat is the opp U wheat for US. and for Canada? I ’2 3/ “\V-——. ‘ opportunity cost of 911.113.132.925} ,0! profiusinavne ton of I‘M-jug 10.3) —, 5 mix-CA: the 3 B , f_ _ ’ ';__.._.__W._m. “we. din-..” C 0J4 With t”); )fiy‘flzjfiauh \Q‘S’W’ls - MD has 2 l5 were”, 1’30 hug :‘CJQUW __, 7., a a. a ' Eff-3 {Icy 1"" ck“) . r— _ EGO 1m. zoooms 5W5 = l “PM teens 2 t tat-s : c, Which nation has comparative advantage in wheat production and why? comparative advantage in auto production and why? Coin otdu. lief. iii/tripe. New. {.1dura'I-t'ttatj/u in Winter talc than) C "('{.arr-' ‘a‘.‘-‘.A_'_p\l_t _‘ _. PM Who!“ '3’ WV?! Hér'wwa“ ' “13315- 119 i009 Qntvtl’nmhw. educate m Omit) t/‘roOa‘x’dwm is]; {NH Dig $9.3» g_\’fl_0915\bw{r ‘ a W h a}: d. Based on the principle of comparative advantage, which nation should specialize in auto lA1: d ‘. 5 MS Wlm'a _ and which nation should specialize in wheat production? p 0 “Cum M4 “Xbuildu spat/militate im unit) EL'Yodwch'fik, CWO“ Gilli-dd cdb’tt w» Wintoti pironme Which nation has Chapter 2 p.6 e. What would be an acceptable international terms of trade between the U.S. and Canada? (Hint: figure out the minimum tons of wheat that the nation with a comparative advantage in auto (or the seller of autos) will accept for one auto. and the maximum tons of wheat that the nation with comparative advantage in wheat (or the buyer of autos) will be willing to pay for an auto). Why must the international terms of trade (also referred to as the trading possibilities lines) be between the two nations' MRTW A (Le, the opportunity cost of producing auto)? W915ith '=\ Ctwa Tim .lm rmc, silly golf in c Cl ice Quaint-sac: ‘2; Jams = \ mace \N V. g augment] . t 1 agitati— {m herds oi: lsoiln “(Vila/V" " an. ' ' _ ;."{W\(Ll\-tir't o'lrt Jk'l/LL 'b' a a ' ' “at i)“ ’ " “twig f. Suppose the U.S and Canada agreed on a tenns oftrade of one uto for 6 tons of wheat. exp am {and Lt “ht. Show 011 Your graph in a) how specialization and trade would allow each nation to consumc‘bcyond its pre—trade (autarkfi’l transformation schedule? Assume that the post-trade consumption pomt for the U.S. is 25 autos and 150 tons ofwheat. find the post-trade consumption level for Canada? Show the trade triangle for each country? Lwlnat they super t- ! {aim t— tlgtte idré’t Oomph 9, Suppose that the U.S. had a total labor supplv of 20 while C anada's total labor supply remained at 10. h Does this change which natioa has comparative advantage in auto or wheat production? Does it ,1 change the terms oftrade? Does it change the gains from free trade? Hgfikutuh“ 0 (5+ an 3'15 4th: Sf‘ki‘vi‘fiw ‘ll‘utlxfi‘t' Conn (l a t :1. - ‘- pi a d..-*..,t.»:-,t'.. Iv“, letp-l {if} l‘t.'. tar-id. Clam/tame) h. If technological improvement increases Canada's auto output per labor hour from 3 to 6. does this Change the compamivc ad‘i'amagl‘: beuvecrl the US and Canada? Briefly explain your reasoning? Q wt‘é" Jl'lmi C,.'Cit€ttt'¥\(7‘l"hfi\ \JGi-‘t‘r \‘Jtlx‘tti * :94 Lia-11:1 1“) {ti ‘59 {tum _, MA] 1“ -\\.m¢gt-._ «H— olt-rec lat-m Vt $. to Qanmnmxdv a. 1A \\!\":0cir twat gay i Chapterlpf} ...
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