The United States and Mexico recently negotiated a trade agreement that eliminated many of the restrictions on trade between the two countries
a. Using the tools of microeconomics, describe how such an agreement will benefit both the USA and Mexico.
b. Will everyone benefit from such an agreement? who stands to lose from such an agreement. Why?
a.
See section 16.5 of text.
b.
Not everyone will benefit from the elimination of trade restrictions. The US and Mexico will tend to specialize in the industries for which they have a comparative advantage. Therefore, some US industries will expand while others will contract and likewise for Mexico. The workers in the contracting industries in each country will lose from such an agreement.
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Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?
a. the effect of taxes on the prices of airline tickets, and the profitability of automobile-manufacturing firms b. the price of beef, and wage differences between genders c. how consumers maximize utility, and how prices are established in markets for agricultural products d. the percentage of the labor force that is out of work, and differences in average income from country to country
If realized capital gains are counted as household savings, then the saving rate in the US over the past 2 decades has
a) fallen sharply from 10% to nearly zero b) hovered near zero and occasionally been negative c) remained roughly steady at 10% d) increased sharply e) varied dramatically as the stock market has fluctuated