Can you justify the trade agreement on the basis of pareto

Reference no: EM13213820

Country A has soil that is suited to corn production and yields 135 bushels per acre. Country B has soil that is not suited for corn and yields only 45 bushels per acre. Country A has soil that is not suited for soybean production and yields 15 bushels per acre. Country B has soil that is suited for soybeans and yields 35 bushels per acre. In 2004, there was no trade between A and B because of high taxes and both countries together produced huge quantities of corn and soybeans. In 2005, taxes were eliminated because of a new trade agreement.What is likely to happen? Can you justify the trade agreement on the basis of Pareto efficiency? Why or why not?

Reference no: EM13213820

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