New gold mines are discovered in south africa

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New gold mines are discovered in South Africa, a country which is an exporter of gold. These mines are immediately available for production.

a) Supposing that we have free trade, draw the South African production possibility frontier and analyze the possible effects of the gold mines discovery on its welfare.

b) Explain whether the Government of South Africa should have any incentives to restrict the gold production in the new mines. Show your results in a graph.

c) Would your previous results in (b) continue to be valid if the country discovering the gold mines was China, an importer of gold? Show your results in a graph, analyzing the possible effects on the welfare of China.

Reference no: EM132401243

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