F07ex1464[1]

F07ex1464[1] - You are not allowed to consult any notes or...

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You are not allowed to consult any notes or books. You have to write your answers in the blue book that the persons proctoring the exam give you. Your answers should reflect only your knowledge. Attempting to consult with others or to look at someone else’s work constitutes academic misconduct. Please return this page with your blue book. Econ 464 M. Muniagurria Fall 2007 Midterm 1 (Total Points : 95 ) (I) The production technologies of Home and Foreign are specified by the unit labor requirements shown below: Home Foreign (*) Textiles(T) 2 4 Wine(V) 4 1 Suppose there are 40 units of labor in each country , that consumers have “nice” indifference curves and that both commodities are consumed in autarky. Answer the following questions. Justify fully. Use a diagram or an equation when you are able to do so. (1) (4 pts) Graph the production possibilities frontier and a possible autarky point for both countries ( put textiles in the horizontal axis ). (2) (6 pts) What are the autarky relative prices p T / p V in each country? Which country has a comparative advantage in textiles and why? Free trade
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F07ex1464[1] - You are not allowed to consult any notes or...

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