Quiz 5 with answers and hints

Quiz 5 with answers and hints - 1. Consider the market for...

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1. Consider the market for socks in Australia, a small country. The domestic quantity demanded is given by QD = 20 – 4P, where P is the market price. The domestic quantity supplied is given by QS = P. The world price for socks is $2. If the Australian government introduces a $1 tariff. What is the tariff revenue raised? a. tariff revenue is $2. b. tariff revenue is $4. c. tariff revenue is $5. d. tariff revenue is $6. e. None of the above [Hint: Draw the diagram, tariff revenue is equal to (2-1)*(8-3)] 2. According to the data in the table below, Australia has a. a comparative advantage in good A. b. a comparative advantage in both goods. c. an absolute advantage over Malaysia in both goods. d. an absolute advantage in good A but not in good B. e. both a and c. [Hint: T&F p. 368] 3. According to the data in the table in Question 2, in Australia the opportunity cost of 1 more unit of Good B is a. 4 units of good A. b. 5 units of good A. c. 1.25 unit of good A. d. 0.8 unit of good A. e. 1 unit of good A. [Hint: T&F p. 368] 4. According to the table in Question 2, a. Australian workers are less productive in both goods. b. Both countries will gain if they specialize and trade, if Australia produces A and Malaysia produces B. c. Both countries will gain if they specialize and trade, if Australia produces B and Malaysia produces A. d. Australia cannot gain from trade with Malaysia. e. if Malaysian labour is cheaper, both goods should be produced in Malaysia. [Hint: T&F p. 370]
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5. The PPF below takes the particular shape in the diagram because a. there is economy of scale in production b. the opportunity cost of producing both good increases with the quantity c. two countries trade with each other d. each country has comparative advantage in one of the goods e. neither country has an absolute advantage in both goods. [Hint: T&F p. 373] 6. In a market with international trade shown in the figure below, a. the relevant supply curve includes BDF . b. the relevant supply curve includes ADE.
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Quiz 5 with answers and hints - 1. Consider the market for...

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