Tropical Springs


Emerald Island has a climate that is suited to banana production and yields 840 pounds per acre. Tropical Springs has a climate that is not well-suited for bananas and yields only 250 pounds per acre. Emerald Island has a climate that is not well-suited for mango production and yields 325 pounds per acre. Tropical Springs has a climate that is suited for mangoes and yields 950 pounds per acre. In 2015, there was no trade between Emerald Island and Tropical Springs because of high tariffs and both countries together produced huge quantities of bananas and mangoes. In 2016, tariffs 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?

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