MidtermTradeReview1

MidtermTradeReview1 - Midterm Review Questions You will...

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Midterm Review Questions You will find below practice questions for the midterm exam. Practice each of these. If you feel you need more practice, make up your own questions like these and do those as well. For example, set up one like questions 1 or 3 but put in your own numbers. Or set up a question like question 2 but specify a different production functional form. Also, think about the implications of the assumptions you are making for each of the models. The midterm exam questions will follow this same basic format. Please note that there are NO questions on Chapter 5 (The Standard Trade Model) in this midterm exam. 1. Suppose we have a model of international trade between two countries, A and B, where each country can produce two goods: coffee ( C ) and tea ( T ). Let A’s and B’s Production Possibility Frontiers (PPF) be given by equations (1) and (2), respectively: AA A LC C LT T La Qa Q =+ (1) BB B LC C LT T Q (2) Let the production technology across the two countries be characterized as follows: 2 A LC a = , 9 A LT a = , 6 B LC a = , 4 B LT a = Further, we assume that A L = 1800 and B L = 2400.
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MidtermTradeReview1 - Midterm Review Questions You will...

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