Exam%20_1%20ANSWERS%20_Spring%202009_

Exam%20_1%20ANSWERS%20_Spring%202009_ - Name: _ (Last name,...

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Spring 2009 1/12 Name: _________________________ (Last name, first name) SID: _________________________ Econ 181 International Trade Professor Steven Wood Spring 2009 Exam #1 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 5:00 p.m. on March 10, 2009. _____________________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: 1. Completely , clearly and accurately label all axis, lines, curves, and equilibrium points. 2. The original diagram and equilibrium points MUST be drawn in black or pencil. 3. The first shift of any line(s) and the new equilibrium points MUST be drawn in red. 4. The second shift of any line(s) and new equilibrium points MUST be drawn in blue Do NOT open this test until instructed to do so. Good Luck!
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Spring 2009 3/12 A. Multiple Choice Questions . Circle the letter corresponding to the best answer (3 points each; total of 30 points.) 1. Why does the gravity model work? a. Large economies become large because they were engaged in international trade. b. Large economies have relatively large incomes and, therefore, spend more on export promotion. c. Large economies have relatively large areas which increases the likelihood that an industry in which it has a comparative advantage will be located within its borders. d. Large economies have large incomes and tend to spend more on imports. 2. The Ricardian model demonstrates that: a. Trade between two countries will benefit both countries. b. Trade between two countries will benefit both countries regardless of what good each exports. c. Trade between two counties will benefit both countries only if each country exports the product in which it has a comparative advantage. d. Trade between two countries will benefit one country but will harm the other country. 3. In a two country, two product Ricardian model , if a country’s relative wage exceeds its relative productivity, then it is most likely that: a. Free trade will improve both countries’ economic welfare. b. Free trade will result in no trade taking place. c. Free trade will result in each country exporting the good in which it enjoys comparative advantage. d. Free trade will result in each country exporting the good in which it suffers a comparative disadvantage. 4. In international trade equilibrium in the Heckscher-Ohlin model: a. The capital rich country will charge less for the capital intensive good than the price paid by the capital poor country for the capital intensive good. b.
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Exam%20_1%20ANSWERS%20_Spring%202009_ - Name: _ (Last name,...

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