Chapter 5 Second Homework.docx

Chapter 5 Second Homework.docx - 1 Chapter 5 Second...

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Chapter 5 Second Homework 1. Figure: The Market for Tea in Sri Lanka Reference: Ref 5-17 (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P 1 . When the economy is opened to trade, the price rises to P W . Sri Lanka will _____ tea and the volume of trade will equal _____. export; Q T – C T import; Q T C T import; Q T – Q 1 export; Q 1 – C T 2. If the United States placed larger tariffs on all textiles, domestic _____ surplus would _____. producer; increase total; increase producer; decrease consumer; increase 3. Figure: The Market for Oranges in South Africa Reference: Ref 5-11 (Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P 1 . When the economy is opened to trade, the price falls to P W and consumer surplus will _____ to area _____. rise; M + N + O
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fall; M + N rise; M + N + O + P fall; M 4. If a market begins to engage in international trade, we can assume that: producers in the importing industry may be worse off. consumers of the imported good may be worse off. consumers of the exported good may be better off. producers in the exporting industry may be worse off. 5. Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____. remain the same; increase increase; increase increase; decrease decrease; remain the same 6. Figure: The Production Possibility Frontiers for Jackson and Tahoe Reference: Ref 5-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. _____ has a(n) _____ advantage in the production of _____. Jackson; comparative; wheat Tahoe; comparative; wheat Jackson; comparative; cattle Jackson; absolute; cattle 7. Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries. higher; lower lower; lower higher; higher lower; higher 8. If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____.
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rise; fall rise; rise fall; fall fall; rise 9. Figure: The Production Possibility Frontiers for Jackson and Tahoe Reference: Ref 5-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If both nations specialize completely in the good of their comparative advantage and Jackson
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