Exam 1 Solutions

# Exam 1 Solutions - IMPORTANT: Place your NAME, FORM NUMBER...

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IMPORTANT: Place your NAME, FORM NUMBER and ID NUMBER on your scantron form. Economics 328Y1Y, Fall 2007 Professor Peter Morrow Exam 1 October 22th, 2007 2:10pm-4:10pm SOLUTIONS FORM 1 Fill in the information below: Name______________________________ Student ID _________________________ INSTRUCTIONS 1. Do not open this exam until you are told to do so. STOP work immediately when told to do so. 2. Place your NAME, FORM NUMBER, and your ID NUMBER on your scantron form. 3. This exam has 100 points and is in two parts: Multiple Choice (19 questions @ 3 points each=57 total points) and Long Question (43 total points). For all questions, there is no penalty for guessing. 4. For the long question, box your final answer. 5. Your scantron will not be returned to you. Be sure to mark your answers on the exam booklet so that you will later have a record of your answers. 6. You are allowed to use simple (non-programmable) calculators. Programmable calculators are forbidden. Cell phones, blackberrys, PDA’s, IPODs, and all devices that can contain programmable information are forbidden. 7. Do not cheat. If you are caught cheating, I will penalize you to the greatest extent allowed by the University. Possession of any forbidden item will be construed as cheating. GOOD LUCK!

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Multiple Choice (57 Points) 1) Suppose that consumers in each country possess the utility function U = D W 1/7 D C 6/7 where D W is consumption of wine and D C is consumption of clothing. The equation for the relative demand curve will be a. p c p w = 6 D W D C " # \$ % b. p w p c = 6 D W D C " # \$ % c. p c p w = 1 6 D W D C d. p w p c = 1 6 D W D C e. p w p c = D W D C 2) The article “Ricardo’s Difficult Idea” is written by: a. Paul Krugman b. Paul Krugman and Maurice Obstfeld c. Lawrence Summers d. Martin Wolff. e. Dani Rodrik 3) Suppose that there are two countries (A&B) and two industries. Output per worker is 22.5 in a given industry for two countries. Under the Ricardian model, this implies that a. Country A possesses a comparative advantage in the other industry. b. Country B possesses a comparative advantage in the other industry. c. No country possesses a comparative advantage. d. Another country must possess an absolute advantage in the other industry. e. We cannot make any statements based on the data given. 4) The Ricardian model differs from the Heckscher-Ohlin model in that it a. assumes that there is more than one factor of production. b. assumes that there are more than two goods. c. emphasizes productivity differences. d. cannot explain differences in wages across countries. e. does not make predictions about the pattern of trade.
5) Observe the Lerner diagram below where a country producers two goods: computers and textiles. Given the iso-value (CC & TT for computer and textiles, respectively) and iso-cost curves below, subsequently we are likely to observe: a. firm entry in the computer sector. b. firm exit in the textile sector.

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## This note was uploaded on 03/27/2011 for the course ECO 364 taught by Professor Petermorrow during the Fall '10 term at University of Toronto.

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Exam 1 Solutions - IMPORTANT: Place your NAME, FORM NUMBER...

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