econ353-2009fall-ps2 answers

econ353-2009fall-ps2 answers - METU/FEAS Econ 353 Hakan...

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METU/FEAS 03.11.2009 Econ 353 Hakan ERCAN Tuna GONULDAS Gorkem KARABAYIR PROBLEM SET 2- ANSWER KEY PART A: MULTIPLE CHOICE QUESTIONS 1.b 2.c 3.d 4.a 5.c 6.a 7. In the first graph, as the price of good X decreases, the amount of X that we can get with full utilization of our income, increases. So, only the amount on the X axis changes, and we do not observe a parallel shift. However, if our income increases, our budget costraint will shift outwards in a parallel manner. The answer is c 8.a 9.c 10.c PART B: TRUE-FALSE QUESTIONS 1.T 2.T 3.F 4.T 5.F PART C: FILL IN THE BLANKS 1) Poland => 1 F: 0,6P Denmark => 1 F : 0.25 P Sweeden => 1F : 1P Denmark and Sweeden have the greatest incentive to trade. In this case, Denmark exports fish and Sweeden exports potatoe. If TOT is 1 F : 0,5 P, Poland will not engage in trade with Sweeden. Because TOT does not lie between two countries prices. (TOT should had been somewhere between 1F: 0,6 P and 1F:1 P) The trade won’t be mutually benefical for both of the countries. When TOT is 1 F: 0,5 P, Poland imports fish from Denmark and exports Potatoe outside. 1
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Blanks ( respectively ) Denmark /Sweeden/ Denmark/Sweeden/ Poland /Poland 2) A shift in tastes and preferences in favor of foreign goods, which leads to a/an increase
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econ353-2009fall-ps2 answers - METU/FEAS Econ 353 Hakan...

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