Modal Exam #1 KEY

Modal Exam #1 KEY - FIRST EXAMINATION ECON 200 FALL, 2009...

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FIRST EXAMINATION ECON 200 FALL, 2009 NAME: _________________________________________________________________ STUDENT ID NUMBER: __________________________________________________ PLEASE CIRCLE YOUR TEACHING ASSISTANT’S NAME: Aran Canes Maria Prada Ron Chan Megha Pradhan Alan Finkelstein Shapiro Pat Sujarittanonta Kristian Lopez Orathai Sujitprapakorn Tim Moore José Torres SIGNATURE: __________________________________________________________ INSTRUCTIONS: 1. Fill in your name (last name, then first name) at the top of the Scantron. Fill in your student ID number on the Scantron sheet. 2. Enter the number 123456 under “Special Codes” on the Scantron sheet 3. Write your TA’s name in the upper right-hand corner of your Scantron sheet. 4. There are 22 multiple choice questions and 3 problems with multiple parts. Please inform a proctor if you do not have all of the questions on your copy. 5. Answer the multiple choice questions on the Scantron sheet. Answer the problems in the space below (please write on the back if you need more room). ***************************************************************** GRADING (TA’s use only): Problem 1 ______ Problem 2 ______ Problem 3 ______ Total _______
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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.          Country A food          120                                                  40                  clothing            Country B food           60                                                            60           clothing (b) Which country has absolute advantage in the production of clothing? Defend your answer in 1-2 sentences. Country B. Each worker can produce 6 units of clothing, while workers in Country A can only produce 3 units of clothing. (Productivity determines absolute advantage.) (c) Which country has comparative advantage in the production of clothing? Defend your answer in 1-2 sentences. Country B. For every additional unit of clothing, Country B has to give up 1 unit of clothing while Country A has to give up 3 units. Country B has the lower opportunity cost in the production of clothing and therefore the comparative advantage in producing clothing. (Comparative advantage in clothing is equal to the slope on the graphs.) Slope = 3 Slope = 1
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(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
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Modal Exam #1 KEY - FIRST EXAMINATION ECON 200 FALL, 2009...

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