TU Import & Export Market for Mexico and The United States Essay

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1) Explain how any country, regardless of factor endowments, can benefit from trade?

2) Use the table below to determine the comparative advantage for each country (show your work).

Total Production for Mexico and the United States
Mexico United States
Possibility Burgers Phones Burgers Phones
A 12 0 21 0
B 8 8 14 7
C 4 16 7 14
D 0 24 0 21

3) From your answer in the previous question. what would be an agreeable terms of trade for 1 burger?

4) At the end of the video, a supply and demand graph of the car market for both countries was shown. Explain why Mexico exported cars to the United States.

5) Suppose, the world price for cars is $10,000. Further, the US has a quantity demand at that price of 1,000 cars, and a quantity supplied of 200. How many cars will the US import to satisfy domestic demand?

6) From the previous question, suppose the US imposes a $2,000 tariff on each car. Further, suppose that domestic quantity demand falls by 200 and domestic quantity supplied rises by 200. What is the new quantity of imports? How does a tariff harm societal welfare?

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