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Canada and Mexico have access to the same technology to produce lumber and...

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Canada and Mexico have access to the same technology to produce lumber and televisions. Canada has an abundance of capital to produce both televisions and lumber but relatively little labour. In contrast, Mexico has an abundance of labour to produce televisions and lumber but relatively little capital. Technology for producing televisions combines labour and capital in the following way: 91V = (KTV) (LIV) Technology for producing lumber combines labour and capital in the following way: 91 = (K)} (LL) (a) Compare the ratio of in each country. In which country is the ratio of higher? (b) Draw a PPF for each country that reflects their differences in access to inputs, place TV's on the x-axis and lumber on the y-axis. Compare and contrast the relative domestic price, at an autkary production point on your graph. Ptv (c) Following the signing of NAFTA in 1994, what would the HO predict regarding the trading behaviour (export/import) between these two countries and why? (d) How does the relative domestic price, bis in each country change following NAFTA? (e) Who are the winners and losers in each country following the signing of NAFTA and the start of free-trade between Mexico and Canada

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