- International Economics 1 (176.92 KiB) Viewed 42 times
International economics
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answerhappygod
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International economics
International economics
QUESTION 1. [3 points in total] You and your sibling watched a documentary on Netflix on the environmental impact of trade in fisheries. Your sibling then asks you a few questions about Norwegian fish trade. In this question, you will use the "standard trade model" to frame your arguments. a. Your sibling asks you: "Why does Norway export fish to other countries?" Assume that Norway and Sweden trade with each other, with Norway exporting fish to Sweden and Sweden exporting Volvos (automobiles) to Norway, Illustrate the gains from trade between the two countries using the standard trade model, assuming first that tastes for the goods are the same in both countries but the production possibility frontiers differ: Norway has a long coast that borders on the north Atlantic, making it relatively more productive in fishing. Sweden has a greater endowment of capital, making it relatively more productive in automobiles. [1 point] b. Your sibling then asks you: "What if there is overfishing in Norway? Do the two countries still benefit from trade with each other?" In the trade scenario of question 1(a.), due to overfishing Norway becomes unable to catch the quantity of fish that it could in previous years. This change causes both a reduction in the potential quantity of fish that can be produced in Norway and an increase in the relative world price for fish, PF/PA. Show how the overfishing problem can result in a decline in welfare for Norway. Also show how it is possible that the overfishing problem could result in an increase in welfare for Norway. [2 points)
QUESTION 1. [3 points in total] You and your sibling watched a documentary on Netflix on the environmental impact of trade in fisheries. Your sibling then asks you a few questions about Norwegian fish trade. In this question, you will use the "standard trade model" to frame your arguments. a. Your sibling asks you: "Why does Norway export fish to other countries?" Assume that Norway and Sweden trade with each other, with Norway exporting fish to Sweden and Sweden exporting Volvos (automobiles) to Norway, Illustrate the gains from trade between the two countries using the standard trade model, assuming first that tastes for the goods are the same in both countries but the production possibility frontiers differ: Norway has a long coast that borders on the north Atlantic, making it relatively more productive in fishing. Sweden has a greater endowment of capital, making it relatively more productive in automobiles. [1 point] b. Your sibling then asks you: "What if there is overfishing in Norway? Do the two countries still benefit from trade with each other?" In the trade scenario of question 1(a.), due to overfishing Norway becomes unable to catch the quantity of fish that it could in previous years. This change causes both a reduction in the potential quantity of fish that can be produced in Norway and an increase in the relative world price for fish, PF/PA. Show how the overfishing problem can result in a decline in welfare for Norway. Also show how it is possible that the overfishing problem could result in an increase in welfare for Norway. [2 points)
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