Suppose that Canada can produce 1500 tons of wheat or 500 tons of steel. Suppose that Brazil can produce 1000 tons of wheat or 1500 tons of steel.
a. What is the opportunity cost of 1 unit of wheat in Canada? Show your work.
b. What is the opportunity cost of 1 unit of steel in Brazil? Show your work.
c. Which country has a comparative advantage in producing steel? Explain why.
d. Suppose that trade takes place between Canada and Brazil. Which good will Brazil import from Canada? Explain why.
a. Describe an export subsidy, and explain the gains and losses that might arise
from such practice. (5 marks)
b. Why are developing countries in Africa especially affected by export subsidies in industrial countries?