Mexico produce only two goods, fish and coconuts. They only consume goods
produced within their own country and do not trade with anyone. However Mexico needs more fish now.if they produce more fish they have to give up more coconuts. In the neighbor country, Canada has lower relative price in fish.Mexico and Canadian president sign agreement for trade.
will Mexico as a whole be able to purchase more fish and more coconuts after the agreement enacted?
4.does the answer to previous question, require the mexican economy to produce at an efficient point along its PPF? How mexico could reach that efficient point?
If not, then explain why your answer to the previous question does not require the Mexican economy to produce at an efficient point along its PPF.
To answer whether Mexico, as a whole, will be able to purchase more fish and more coconuts after the agreement is enacted, we need to consider the concept of comparative advantage. Comparative advantage refers to a country's ability to produce a good at a lower opportunity cost compared to another country.
Before the agreement, Mexico had to give up more coconuts to produce additional fish, which means the opportunity cost of producing fish was higher for Mexico. On the other hand, Canada had a lower relative price in fish, indicating their comparative advantage in fish production.
By signing the trade agreement, Mexico can now benefit from Canada's lower relative price in fish. This means Mexico can import fish from Canada at a lower cost than producing it domestically. As a result, Mexico can reallocate its resources previously used in fish production towards coconut production. This allows Mexico to increase their total output of both fish and coconuts.
Now, regarding the efficiency question, reaching an efficient point along the Production Possibility Frontier (PPF) is not a requirement for Mexico to be able to purchase more fish and more coconuts after the trade agreement. The PPF represents the maximum output a country can achieve with given resources and technology. However, trade allows countries to specialize in the production of goods in which they have a comparative advantage and import goods in which they have a higher opportunity cost.
In this case, Mexico can focus more on producing coconuts, which it has a comparative advantage in, and import fish from Canada. By doing so, Mexico can increase its consumption of both fish and coconuts without necessarily reaching its PPF's efficient point. This is because trade allows countries to achieve gains from specialization and exchange, ultimately leading to increased overall welfare and consumption possibilities.
In summary, after enacting the trade agreement with Canada, Mexico, as a whole, can purchase more fish and more coconuts. Reaching the efficient point along the PPF is not a requirement for this outcome, as trade allows countries to specialize according to their comparative advantage and benefit from the lower opportunity cost of importing goods.