HW#1 Answer Key

HW#1 Answer Key - ECN 162 International Economic Relations...

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ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2010 Assignment 1 (Maximum Points: 100) Answer Key Due Thursday, October 7, at the beginning of class. Multiple-Choice Questions (Each question is worth 1.5 points) Answer questions 1-3 based on the following PPF. 1. The relative price of S (in terms of T), P S /P T , is (a) 2. (b) ½. (c) 500. (d) 1000. 2. The relative price of T (in terms of S), P T /P S , is (a) 2. (b) ½. (c) 500. (d) 1000. 3. If the relative price of T were to increase, then the price line would (a) shift out in a parallel fashion. (b) shift in a parallel fashion. (c) become steeper. (d) become flatter. 4. In autarky, when a country maximizes its utility, its consumption point is (a) below the production possibility frontier. (b) on the production possibility frontier. (c) above the production possibility frontier. (d) cannot tell without more information. 1
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Answer questions 5-9 based on the following diagram of a country in international trade equilibrium EB represents the country’s PPF. FB represents the terms of trade line. 5. This country has comparative advantage in good (a) S. (b) T. (c) Y. (d) Z. 6. In a trade equilibrium, this country produces at point (a) B. (b) C. (c) D. (d) E. 7. In a trade equilibrium, this country consumes at point (a) B. (b) C. (c) D. (d) E. 8. Exports for this country equal (a) OA units of Z. (b) AB units of Z. (c) AC units of Y. (d) AD units of Y. 9. Imports for this country equal (a) OA units of Z. (b) AB units of Z. (c) AC units of Y. (d) AD units of Y. 10. With other things unchanged, in the Ricardian model, a rise in the average price of imports or a fall in the average price of exports will: (a) improve the terms of trade. (b) worsen the terms of trade. (c) expand the production possibilities frontier. (d) contract the production possibilities frontier. 2
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11. Suppose that the introduction of computers increases the productivity of workers in the developed world. What would you expect wages to do? (a) rise mainly in the developed countries. (b) rise mainly in the developing countries. (c) fall mainly in the developed countries. (d) fall mainly in the developing countries. 12. According to the Heckscher-Ohlin (HO) model the source of comparative advantage is a country's (a) technology. (b) advertising.
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HW#1 Answer Key - ECN 162 International Economic Relations...

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