Watch video and answer questions.
https://sorrell.mediasite.com/mediasite/Play/89792...
1) Explain how the United States, being a large economy with an abundance of natural resources, labor, and capital, can benefit by not being in autarky.
2) It was shown in the video that the United States had the
comparative advantage in burgers. Using the table below, show and
explain how Mexico has the comparative advantage in phones.
|
Mexico |
U nited States |
|||
|
P ossibility |
B urgers |
P hones |
B urgers |
P hones |
|
A |
6 |
0 |
12 |
0 |
|
B |
4 |
8 |
8 |
8 |
|
C |
2 |
16 |
4 |
16 |
|
D |
0 |
24 |
0 |
24 |
3) From your answer in the previous question, what is the
opportunity cost of burgers for the United States, i.e. how many
burgers must the United States give up to produce one phone? What
would be an agreeable terms of trade for 1 phone?
4) At the end of the video, a supply and demand graph of the
phone market for both countries was shown. Explain why Mexico
exported phones to the United States.
5) Suppose, the market for burgers was shown rather than the
market for phones in the supply and demand graphs. For the United
States to export burgers and Mexico to import burgers, what would
world price need to be, in each country, relative to the domestic
price?
6) Lastly, explain what a tariff is and the effect it can
have on burger imports for Mexico.
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