Exam#2 Practice test

Exam#2 Practice test - E CON 200 E xam#2 P ractice Test 09...

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Exam#2 Practice Test 09 1 st Exam 1. (12 points) Suppose Country A has 40 workers and each worker can produce either 3 units of food or 1 unit of clothing. Country B has 10 workers and each worker can produce either 6 units of food or 6 units of clothing. (a) Draw in separate diagrams the production possibilities frontier for each country. Place clothing on the horizontal axis and food on the vertical axis. Be sure to label the intercepts and the slope on your diagrams. (b) Which country has absolute advantage in the production of clothing? (c) Which country has comparative advantage in the production of clothing? (d) Suppose that in the absence of trade, Country A produces and consumes 60 units of food and 20 units of clothing, while Country B produces and consumes 30 units of food and 30 units of clothing. Someone proposes the following agreement:“Country A will produce only food and no clothing. Country B will produce only clothing and no food. Country A will give 30 units of food to Country B in exchange for 20 units of clothing.”Will Country A accept the agreement? Will Country B accept the agreement? 09Final Problem 3 (13 points)
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Exam#2 Practice test - E CON 200 E xam#2 P ractice Test 09...

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