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Midterm Solutions

Midterm Solutions - Econ 370 Mid-Term Fall 2009 Chong Xiang...

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Econ 370 Mid-Term, Fall 2009 Chong Xiang The exam consists of 3 parts, multiple choice questions ( 18 points ), true/false questions (27 points) , and short answer questions ( 18 points ). Please write your answers to true/false questions and multiple choice questions on the scantron, and write your answers to short answer questions on the test booklet. Make sure that you have XXXX pages in your test booklet. Closed book. First Name Last Name PLEASE PRINT LEGIBLY Student ID Number 1
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Econ 370 Mid-Term, Fall 2009 Chong Xiang Part I. Multiple choice questions. (1.5 points each, 18 points total) For questions 1-2, The United States requires 20 hours of labor to produce a ton of steel and 30 hours of labor to produce 1,000 board feet of lumber. In Canada, 20 hours of labor are required to produce a ton of steel and 25 hours of labor to produce 1,000 board feet of lumber. 1. Which country has an absolute advantage in the production of lumber? A) The United States B) Canada C) neither the United States nor Canada D) both the United States and Canada Ans: B 2. Which country has a comparative advantage in the production of lumber? 3. Assume the MPLc = 2 cars and the MPLb = 5 boats. There are 150 workers in this hypothetical economy; the slope of the PPF for this economy is: 4. If the maximum number of cloth produced is 300 and the maximum number of corn produced is 600, then with a MPLcloth = 2, what is the number of workers in the economy? 5. A nation will gain from trade if it: A) produces and consumes along its PPF. B) produces outside its PPF and consumes along its PPF. C) consumes outside its PPF and produces along its PPF. 2
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Econ 370 Mid-Term, Fall 2009 Chong Xiang D) produces and consumes outside its PPF. Ans: C For questions 6-7, consider the following Table: Production in the United States and China
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