President Trump campaigned on the promise to Make America Gr

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:

1. First assume that neither the US or foreign countries allow any trade between the two parties (treat all foreign countries as 1 party, e.g., the farmer). Illustrate what their production for their consumer market for 2 goods would be

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

3. Assume that the US wanted to increase its domestic production such that it could produce as many goods as had been available when trade was allowed. What would the US have to do to increase production of both goods?

Solution

At Chegg we try to help student and solve your queries however we are authorized to answer 1 question and its sub-parts at a time. Hence solving question no 1. Do give a thumbs up for the answer and the efforts put in.

As we can see from the paragraph is that the initial intention is to be self-sufficient and to produce things inside the country and also to demote any foreign goods whatsoever.

Now if we assume that neither the US nor the foreign countries allow any trade between the two parties then as per the

Production Possibilities Frontier Curves model for Trade between 2 people we can clearly see that the production will be constrained and that the countries will then be trading and using the products produced and procured within the country and not outside it.

We will be having a production curve which will be influenced only by the Gross domestic produce and not by the exports and simultaneously no imports as there will be no case for imports by any of the countries.