Exam 2 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 SOLUTIONS October 22 nd , 2007 6:10pm-8:10pm 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 (20 questions @ 3 points each=60 total points) and Long Question (40 total points). For all questions, there is no penalty for guessing. 4. For the long question, box your final answers. 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 (60 POINTS) 1) Suppose that a j i is the unit labor requirement for good j in country i . If there are two countries (North & South) and two goods (X&Y) what inequality must hold in order for the South to possess a comparative advantage in good X? a. a X N < a X S b. a X N / a X S < a Y N / a Y S c. a X N / a X S > a Y N / a Y S d. a X N / a Y N < a X S / a Y S e. a X N > a X S 2) Suppose that Belgium only produces diamonds and Columbians only produce cups of coffee. Diamonds cost $200 each and coffee costs $1.25 a cup. Belgian workers can each produce 1000 diamonds per year. A Colombian worker can produce 1000 cups of coffee per year. The Ricardian model predicts that the relative nominal wage of a Belgian worker to a Colombian worker will be: a. 0.16 b. 1.6 c. 16 d. 160 e. 1600 3) Given the basic Ricardian model, there are two countries (A&B) and two goods (X&Y) and unit labor requirements are as below: X Y A 42 21 B 13 26 In free trade, the relative price of one unit of X in terms of Y must be between ____ and ____. a. 0.5,2 b. 1/3,2 c. 0.5,4 d. 13,21 e. 26,42
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4) With respect to the gains from trade, the Heckscher-Ohlin model predicts that a. Everyone always gains from trade. b. winners win by the same as losers lose. c. the relatively abundant factor gains while the relatively scarce factor loses. d. the relatively abundant factor loses while owners of the relatively scarce factor gains. e. the South gains from trade while the North neither gains nor loses.
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Exam 2 Solutions - IMPORTANT: Place your NAME, FORM NUMBER...

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