Sample Problems for Midterm 1

# Sample Problems for Midterm 1 - Note: Our midterm will...

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Note: Our midterm will have problems similar to these, but it will be longer. You are responsible for all the material discussed in lecture, as well as in textbook chapters 1-4. Good luck! Sample Short Answer 1. Suppose that the only goods produced by Norway and the United States are fish (F) and automobiles (A). Suppose that the PPF for Norway is given by F = 200 - 2A. Suppose that the PPF for the United States is given by F = 400 - (1/2)A. You may find it helpful to draw a graph, although it is not required. a. What is the OC of producing fish in Norway? In the United States? What is the OC of producing automobiles in Norway? In the United States? b. Which country has a comparative advantage in the production of automobiles? Which country has an absolute advantage in the production of fish? c. According to the theory of comparative advantage, which country should specialize in the production of automobiles? d. Suppose that technological innovations in the United States lead the PFF to become F = 400 - (1/4)A. Did the technological innovation do more to improve productivity in the fishing industry or in the automobile industry? Explain your answer using the concept of opportunity cost. 2. Suppose that the supply curve for petroleum (measured in millions of barrels per day) is given by Q S =(1/2)P+80 and suppose that the demand curve for petroleum is given by

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## This note was uploaded on 04/13/2008 for the course ECON 1 taught by Professor Tang during the Spring '08 term at UCSD.

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Sample Problems for Midterm 1 - Note: Our midterm will...

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