Use the following data to answer the questions that follow: The following two nations (Mexico and the United States) have the production possibilities associated with Rice and Corn production in their respective country's: MEXICO Product A B C Rice Corn 0 24 29 12 D E 18 Product Rice 0 36 Corn A B 36 24 11 48 72 6 0 UNITED STATES C 40 23 DE 72 12 108 0 1) Which product does Mexico have a comparative advantage in producing as compared to the United States? 2) Which product does the United States have a comparative advantage in producing as compared to Mexico? 3) What would be a appropriate terms of Trade between these two nations for the two items to allow both nations to reap a benefit from engaging in International trade with one another 4) Assuming each nation were to have no international trade and elected to produce at their respective combination C on their respective production possibilities curve (i.e. Mexico were to produce 29 Rice and 11 Corn, and the United States produce 40 Rice and 23 Corn), if they altered that isolationist mentality and agreed to engage in International Trade with a defined terms of trade of 3.5 Rice:1 Corn, what would be the increase in both Rice and Corn that each nation would gain due to their respective specialization in production of the good to which they have a comparative advantage and trade amongst themselves?
Answers
Explanation:
Use the following data to answer the questions that follow: The following two nations (Mexico and the United States) have the production possibilities associated with Rice and Corn production in their respective country's: MEXICO Product A B C Rice Corn 0 24 29 12 D E 18 Product Rice 0 36 Corn A B 36 24 11 48 72 6 0 UNITED STATES C 40 23 DE 72 12 108 0 1) Which product does Mexico have a comparative advantage in producing as compared to the United States? 2) Which product does the United States have a comparative advantage in producing as compared to Mexico? 3) What would be a appropriate terms of Trade between these two nations for the two items to allow both nations to reap a benefit from engaging in International trade with one another 4) Assuming each nation were to have no international trade and elected to produce at their respective combination C on their respective production possibilities curve (i.e. Mexico were to produce 29 Rice and 11 Corn, and the United States produce 40 Rice and 23 Corn), if they altered that isolationist mentality and agreed to engage in International Trade with a defined terms of trade of 3.5 Rice:1 Corn, what would be the increase in both Rice and Corn that each nation would gain due to their respective specialization in production of the good to which they have a comparative advantage and trade amongst themselves?