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Assume that Canada and US trade with each other, with US exporting Automobiles and Canada Exporting Crude oil. (Use PPF and Relative Supply – Relative demand curve to explain the following events):
a. What will happen to the aggregate economic welfare in US and Canada, if US comes up with a technological advancement that causes a biased growth toward Automobile industry?
b. What will happen to the aggregate economic welfare in US and Canada, if US imposes a tariff on imports of crude oil?
c. What will happen to the aggregate economic welfare in US and Canada, if oil production in the middle east is disrupted due to war?
d. What will happen to the aggregate economic welfare in US and Canada, if Japan subsidizes its automobile production?
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