Here is the table:
Japan South Korea
Steel Autos Steel Autos
520 0 1200 0
500 600 900 400
350 1100 600 650
200 1300 200 800
0 1430 0 810
Scetch the production possibilty schedule of
Japan and South Korea. Locate steel on the vertical axis
and autos on the horizontal axis of each nations graph.
a. Why are the production possibilites schedules concave?
b. In autarky (no trade) Japan's production and consumption
points along its production possibiliyies schedule are assumed to be
500 tons of steel and 600 autos. Draw a line tangent to Japan's
autarky point, and from it, Calculate Japans MRT of steel into
autos. THIS IS WHERE I AM TOTALLY LOST!!! In autarky South Korea
production and consumption points along its production possibilites
schedule are assumed to be 200 tons of steel and 800 autos.
Draw a line tangent To South Koreas autarky point and from it
calculate
South Koreas MRT of of steel to autos. AGAIN, TOTALLY LOST HERE!!!!!!
c. Based on each nations MRT, should the two nations specialize
according
to the principle of comparative advantage? If yes, in which product
should each nation specialize?
d. With specialization suppose the MRT's of both countries converge
at MRT =1. Starting a Japan's autarky point,slide along its PPS until
the slope of the tangent line equals 1. This becomes Japan's
production point
under partial specialization. How many tons of steel and how many
autos will Japan produce at this point? In like manner, determine
South Korea's production point under partial specialization. How mant
tons of steel and how many autos will south Korea Produce? For the
two nations, do their combined production of steel and autos with
partialspecialization exceed their output in the absence of
specialization? If so, by how much? TOTALLY LOST HERE ONCE AGAIN.
With the relative product prices in each nation now in equilibrium at
1 ton of steel to 1 auto (MRT=1) suppose 500 autos are exchanged at
this terms of trade.
1. Determine the point along the Terms of trade line at which Japan
will locate after trade occurs. What are Japan's consumption gains
from trade.
2. Determine the point along the terms of trade line at which
South Korea
will locate after trade occurs. What are South Korea's consumption
gains from trade? |