The United States, Japan, and China are among the worlds largest producers. To answer the following questions,
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The United States, Japan, and China are among the world’s largest producers. To answer the following questions, assume that their markets are monopolistically competitive, and use the gravity equation with and .
a. Using the gravity equation, compare the expected level of trade between the
United States and Japan and between the United States and China.
b. The distance between Beijing and Tokyo is 1,302 miles. Would you expect more trade between China and Japan or between China and the United States? Explain what variable (i.e., country size or distance) drives your result.
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