Suppose US (N) and Mexico (S) both can produce soccer balls (SB) and footballs (FB). The...

Suppose US (N) and Mexico (S) both can produce soccer balls (SB) and footballs (FB). The unit labor requirements for soccer balls and footballs in the US and Mexico are: a N SB = 10; a N FB = 2; a S SB = 10; a S FB = 10

After trade, if the world relative price pW FB pW SB = 1, which product the US decides to produce? Why? Show full derivation in algebra.

Draw and show the gains from trade for the US using the PPF/CPF graph again. (Use the quanity of Football as the X-axis, draw and label PPF, before and after budget constraints, indifference curves, imports and exports)

After trade, if the US relaxed the immigration policy which increased its population to 150 workers. Which product the US decides to produce then? Does the new immigration policy affect the comparative advantage of the US? Please explain.

If the world relative price pW FB pW SB = 1, would Mexico be better off, worse off, or no change, compared with autarky. Why?

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Rahul Sunny answered 1 year ago

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