If both China and the U.S. specialize in trade, it means that the countries have different opportunity costs to produce each good.
If a price floor is proposed and passed on steel, the result would be a surplus of steel.
Why would nations specialize and trade?
China and the U.S. in this scenario would specialize in producing one good and trade in the other because they have different opportunity costs in producing each good.
They will therefore produce the good that has a lower opportunity cost, and trade the good that has a higher cost.
What happens when a price floor is proposed?
If a price floor is proposed and it is higher than the equilibrium price, it means that suppliers will make more money.
They will therefore produce more steel than the market needs and so there will be a surplus.
Find out more more on price floors at https://brainly.com/question/24827521.
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