Economics 2221 Three Questions Assignment 2015

| November 24, 2016

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Question 1
one purpose of this question is to introduce you to a good source of international trade data. thus , please go to industry Canada’s “ Trade Data online “ website ( and for a country of your choosing , choose a product that is among Canada’s top five imports from that country. provide the HS6 code for this product as well as value of these imports for every year from 2012-2014. also explain why you chose this country (i.e. why you think trade with tis country is particularly important for Canada).

Next, please use two graphs(one for Canada and one for your chosen country) to explain why Canada would want to import this product from this other country from economic perspective. Remember to provide a step- by step explanation of what is happening in your graphs and to explain your graph as if I am a non- economist.

Question 2

suppose there are only two countries in the world : Canada and Germany . Each country can produce two goods: doughnuts and beer. The following table shows the maximum output of beer and doughnuts that Canada and Germany can produce under constant conditions.

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Canada Germany

Doughnuts 60,0000 24,000

Beer 10,000 6,000

please answer the following questions:

a) graph the production possibilities frontiers (PPFs) for Canada and Germany. In the absence of trade , assume that Canada produces and consumes 36,000 doughnuts and 4,000 beers , while Germany produces and consumes 16,000 doughnuts and 2,000 beers. plot these points on each country’s PPF.

b)calculate the marginal rate of transformation for each country and show your calculations. According to the theory of comparative advantage , should the two countries specialize and trade with one another? If so , which country should specialize in the production of each product? Once specialization has occurred, what is the rise in output?

c) suppose the terms of trade between Canada and Germany is 1 beer for 5 doughnuts. Illustrate the trading possibilities curves for each country on the same graph drawn for part A). assuming that 4,000 beers are traded for 20,000 doughnuts , are Canadian and Germans each better off? If so by how much?

Question 3

please answer the following questions regarding extensions of simple Ricardian model:

a) The H-O model is famous for being elegant and mathematically sophisticate , yet falling to describe reality. Explain the Leontief Paradox and then explain how economists “ solved” this paradox.

b) Which model of intra-industry trade best explains trade in the following industries? Remember to clearly explain the critical differences between your chosen model and every alternative.

a.wireless chargers

b. Beer

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