This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 2D4PAA-A Brown University Economics 11, Principles of Economics Students name (please print): Student ID. No.: Spring 2007 Second Midterm Exam Wednesday March 14, 2007, at 10:00 a.m. Professors: R. Serrano and R. Friedberg Time allowed: 50 minutes The total score is 100 points. The exam is divided into two parts. The first part is worth 60 points, and it consists of 10 multiple choice questions, worth 6 points each. Your answers to the multiple choice questions must be marked on the questions themselves. The second part is worth 40 points, and it consists of two problems, worth 20 points each. You must write your answers in the blank space provided following each problem. Show all work for your answer to the two problems. Good luck! 1 Part 1. Multiple choice questions : Select one, and only one, of the choices given for each of the following questions. Circle your selected answer clearly. 1. Suppose our country has a comparative advantage with respect to the rest of the world in the production of baseball caps, and it is a small participant in its world market. This means that the domestic price of baseball caps is lower than its world price, and that our countrys producers must behave as price-takers in the world market. Following a period of autarchy, trade with the rest of the world opens. It is clear that our country will become an exporter of baseball caps, but what are the other effects one should expect? (a) The domestic price will fall, and domestic consumers and producers will benefit. (b) The domestic price will remain the same and the world price will fall to match it, domestic consumers will not be affected, and domestic producers will benefit. (c) The domestic price will fall, and domestic consumers and producers will benefit (consumers from the lower price, and producers from being able to produce more for exports). (d) The domestic price will rise to match the world price, domestic consumers will suffer and domestic producers will benefit. 2. The production of steel causes a negative externality because the polution it creates lowers the air quality, which raises the costs of near-by agricultural productive activities. This introduces a discrepancy between the private cost of producing steel products and its social costs....
View Full Document
This note was uploaded on 05/17/2008 for the course ECON 1110 taught by Professor Mehta during the Spring '08 term at Brown.
- Spring '08