Problem
(a) Draw an offer curve for Guatemala that shows its offer of coffee for wheat. Include both an elastic and inelastic range in Guatemala's offer curve.
(b) Draw an offer curve for the United States that shows its offer of wheat for coffee. Show this US curve intersecting the Guatemalan offer curve in the inelastic range of the Guatemalan curve. Note the equilibrium terms of trade established.
(c) Compare the equilibrium international price you found in question (b) to the autarky prices in Guatemala and in the United States. (You can find a country's autarky price by drawing a line tangent to the offer curve at the origin.) Explain which country benefits the most from a more favorable movement in its terms of trade when it abandons its autarky position.
(d) "The Guatemalan offer curve is likely to be less elastic than the US offer curve." Justify this claim by explaining what factors determine the elasticity of an offer curve.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.