CA Basis and Direction of Trade & Equilibrium Terms of Trade

CA Basis and Direction of Trade & Equilibrium Terms of Trade

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Unformatted text preview: \\ Econ 306, International Trade, CA #2. Instructor: James A. Freeman ‘ Name: Illustrating the basis and direction of trade, the equilibrium terms of trade, and the gains from trade Canada Wheat Autos CA#2. [1.1 W11” 7 {Uni bi: flu,- p‘rndttti‘ 0‘. madden mu“ Club: “P *0 H “H Aé.t5o{:15{-\r._l WM Cg'flu OHM! gradual" Name: - ' ' k} V? n. The pie-trade (murky) equilibrium points for the U.S.A and Canada are given by points A and A’, rehjcecrively. Briefly explain why these points are now called eguilibriurn points? L- D P.“ 1‘ ' . 1"" Y1 T‘J‘skl 7- L0 16; A 3‘1“de Em‘md L.— guPPL‘j (hzniiltji dill‘fldhl J , o. [fthe )[RTl‘L-sA WES at point A and the MR'ICAN wA=8 at point A”. According to comparative admnrage trade theory. why nation should specialize in auto production and which nation should spmflize tn when: production? was , SE12 Croatia in News Carl‘cthQ‘- {Egg-13bit nfl \Ul’l'f-CKSY c. With increasing specialization. the USA moved from point A to B on its transformation schedule, where the MRTL‘S" “=6. Why did the MRTUS" wA- increase when the USA moved from point A to B'.‘ - \‘v'lfi— : Jdu (LWMQ‘IL 9L0'EU l7 6 a} q, err-{licu‘tcw {Elimil‘r CL {Wail-M 90M “ELL 'T‘M ewes-{mum 9? pr ommr (undies WK Lfici‘ffi‘ik -‘u‘fa. KC‘J' {A {Ly mg 0‘: Nicki- ‘SLKCV C’Cdu ' Sign mile. Jr'- cw. -‘ rodJULutL t"£€\w‘ft§ “M Sacrlg‘rb bf‘l‘i N: M ’ he an? d. With increasinn Specialization. C anada mov d from point A‘ to B on its transformation ' _ _ _ _ , schedul -- Where the MRTC'“ w.\=6. Wh,v did the MRTC‘“ w,‘ decrease when Cana 6’ EC V - da moved from 0th A’ t B"? (Hm : What [5 happening to the opportunity cost of wheat when the p 0 MRch” M is decreasing?) .&.%:IECTF|LIJ{JL%L; C"? W‘r’teoil ‘3 ifiCY'f. aging L) gfth£ cos“? of” (kudos (in arms. caches-d) 05.01066 e. Explain why the terms of trade line must lie between the two nations." MRT WA. .4: :1 {oil "or" .' CtC‘m. ]- 0110119 Mmhcfivms brad“: V -'f‘ ick I 9:, _ ELF-CL) our-Wk IAth U 1A5 t . CAf-‘l. 13.2 1". Explain why each nation will not completely speei comparative advantage. Pav‘k’io‘g 319‘19“ Kai-“5‘ .' ’i‘ lilol Ffl‘k'l“) (,filflri’ri CL i“v'\1ti/‘\fil‘tlr*i'l"- 'l’laotl’ Fifi: Q15 Coo-ts m We lingo.“ “aiming t7) Com/U 4, and, ‘Wiflhfi Cost: ' ' ,ve ab alts arr 4:13 t-vtit-xoc’chL, tho/4's e lows/vs (30v ivw Us: v ‘16 U abut-I. til a alize in the production ofthe good in which it has g. Explain why both the U.S.A and Canada gain front specialization and trade at the post-trade consumption point at C and C‘. respectively. WWWWB promo-16M.- a" {EU—\rt."'{w.-'\A.t€"it‘d-it» (“‘0va 3min hell/x i)fihM:\,v’,€g W! am 4x 01}: i': - it in a s ol‘ ital-(vane oi ivoch a a t, mm t. a] a; F V‘Ltfldnvt‘; Wrofith bi inch mimic Afimw'drfid. ‘fh{ {M a dermuttLI it. According to John S. Mills‘ theory of reetproe ie equilibrium terms oftradc will V" “(d rapier? depend on the relative strength ofeach nation‘s demand for the other nation's product. Using the Ey-oduc)( a.“ K . theory ofreciproeal demand. explain how the equilibrium terms oi‘trade will change ifCanada has stronger demand for auto relative to the U.S.A.‘s demand for wheat?I Which nation will gain mOre Pl PdRC‘i'" m’b flit—trade? We citation-meta tam a“ tum «is it “x to am: mu 4- rec. wow {amend (kckvmmrs firms, “up-f: This); D I Tint 'ifi’lmé ‘6’ "(Ct L Wm, {.v. u. -; Q or,“ tab unwitti- i Wkkifibx 9,09% Mint» [MACK ‘(l/u Wig-mg 1,“) Wm. would; Use-WWI- »tjm- trtra. u i. How will the equilibrium term oftrade change it'tlte U.S.A has a stronger demand for wheat relative- to Canada’s demand for auto? in this case. which nation gains more front trade? fine it vans fl-Wo LU vomit LL and a closer {:0 "(i/u UV?- (1109+ Veda‘o Lt.l.~.t’.L-- UM iii-ii "*3 0' «brain with/Mi. tar-tn Wt. i‘b'r tn; Camaoktmma. j. How would you modify the Mills‘ reciprocal demand theory it‘U.S. A. were to trade with a smaller nation instead of Canada? Will the U.S.A or the smaller nation gain more the trade? 1* v7 P0461. bib that Mu Matter die-mavxdcgi-y gm)th oc‘ ,rw (Mal Jar ital-16h will htdwwhd i91x'i‘i“t‘fii't"it"il’\b law or m». littj‘m t Tint dliMW’fl'C. twat-10 0i iii" mvfiw mags“ Wat paved, + wi cm MIC/WU- 61% vm‘t-idvft-‘Jllg MAW “N Jd'kt lil‘jN-Qit" l‘i i’U fatty" (tilQY' tut); Quint ac WkMLl/L 0c 1". “do viii) Viv“? i,’v‘\50\j‘y\3 .) ‘ .MlpJ i Writ“; (Vinita “KW/,0 but ...
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