Question

President Trump campaigned on the promise to "Make America Great Again". Part of this program to make America Great Again relies on bringing jobs back to the US from manufacturing that is now being done in foreign countries. His plan for doing so is in its early stage of development and is likely to include taxes/tariffs on foreign goods and manufacturers, as well as quotas (restrictions on the amount of goods that can be imported).

Use the Production Possibilities Frontier Curves model for Trade between 2 people (Rancher/Farmer) to illustrate your answers to the following questions:

2. Next assume that each party specializes in the good that they have a comparative advantage in and then allow trade between the 2 parties at a price between each's opportunity cost

    a) how would you measure the gains to consumers from allowing trade between the two parties

    b) assume that the US imposes a full ban on the importing of all foreign goods

         1) how would you show the effect of this ban on the amount of both goods available to US consumers

         2) how would you show the gains/losses from this ban to the US

Answer 1