The paper "International Economics: Australia" is a wonderful example of an assignment on macro and microeconomics. (B) The relative opportunity cost of producing steel to aluminium is better off in France when compared to Canada. In France, the production of steel is preferred rather than in Canada. The two nations should specialize. France should specialize in the production of Steel while Canada should specialize in the production of aluminium. The level of specialization is complete. The act of specialization yields increased output for a specific product when compared to the production at times of no trade.
At specialization point, Canada produces 1500 tonnes of aluminium, an excess of 900 tonnes when compared to production at times of no trade. France produces 1200 tonnes of steel at the specialization level but at the absence of the trade period, it produces 600 tonnes, an extra 600 tonnes of steel is achieved as a result of specialization. (c) If specialization and trade occur, then Canada will produce 1500 tonnes of aluminium and France will produce 1200 tonnes of steel, if they trade on the basis of the ratio 1:1, then this will benefit the Canadians.
They will have a surplus of 300 tonnes of aluminium for domestic use. The French consumers will not have enough steel for domestic use. (d) Canada pays for its imports which is the steel from the earnings it gets from the sale of aluminium to France. Canada also pays for the steel imports from the sale of surplus steel to its domestic market. France can only pay for its imports (aluminium) from the foreign exchange it gets after selling steel. Question 2. China is the labour abundant country while Japan forms the capital abundant country.
Exports from a capital-abundant country are from capital-intensive industries and labour-abundant countries normally import those kinds of goods but export labour-intensive goods. It is a hand-made rugs industry that is labour-intensive because it is producing hand-made rugs while the robotic industry in Japan forms the capital intensive industry. This is because the exports of a capital-abundant country will be from capital-intensive industries.
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