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Problem+Set+_1 - Name_Ha Jinkyu(Last name first name...

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Name: ____Ha, Jinkyu ____________ (Last name, first name) SID: ______21517184 ___________ GSI: _____ Gisela Rua__ ________ Econ C181/EnvEcon C181 International Trade Professor Steven Wood Fall 2010 Problem Set #1 Due: September 14, 2010 (at the beginning of class) Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 2. Explanations MUST be word-processed. Your explanations should be succinct and to the point. 3. Graphs and equations MAY be drawn by hand. Problem Set #1 1/13
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A. Multiple Choice Questions . Circle the letter corresponding to the BEST answer (3 points each.) 1. A country has a comparative advantage in producing a good if: a. It produces the good at a lower money cost. b. It can produce more of the good than other countries. c. It is more economically advanced than its trading partners. d. Its opportunity cost of producing that good is lower than elsewhere. 2. A country engaged in international trade based on comparative advantage gains from trade because it: 3. The classic Ricardian model says unequivocally that countries as a whole will always gain from international trade because it: 4. In the classic Ricardian model, international trade can lead to increases in: 5. Define the real wage as the purchasing power of one hour of labor. In the classic Ricardian model, if two countries initially in autarky now engage in international trade then: a. The real wage will not be affected since this is a financial variable. b. The real wage will increase only if a country attains full specialization. c. The real wage will increase in one country only if it decreases in the other. d. The real wage will rise in both countries. Problem Set #1 2/13
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