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Midterm1AK - ECN 162 International Economic Relations Ina...

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1 ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2010 Midterm Exam 1 (Total Points = 100) Tuesday, October 19 6:10-7:30 p.m. Name: _________________________________________ Instructions This exam paper has 9 pages. 1. There are three sections: multiple choice questions, essay questions, and problems. 2. This is a closed book, closed notes exam. 3. Simple calculator is allowed. 4. Please show all your work (except for the multiple choice questions). If you need more space, use the back of the page. 5. Fully label all graphs. Good Luck.
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2 Part I: Multiple Choice Questions (Total = 48 points, 2 points each) Choose the best answer. Explanation is not required. 1. Which of the following statements is true? (a) Countries tend to trade extensively with their neighbors. (b) The United States is an important trading partner for many countries. (c) The largest amount of international trade occurs between industrialized countries. (d) All of the above are true. 2. Suppose the autarky price of S is lower in country A than in country B. Then if trade is allowed 3. The Ricardian model predicts that 4. In the Ricardian model, the direction of trade is determined by 5. One of the predictions of the HO model is that (a) countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other. (b) countries will tend to specialize, but not completely, in their comparative advantage good. (c) the gainers from trade outnumber the losers from trade. (d) All of the above. 6. According to the factor price equalization theorem, if country A is labor abundant, then once trade opens 7. Suppose that there are two factors, capital and labor, and that the United States is relatively capital abundant while Mexico is relatively labor abundant. According to the HO model,
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3 Answer questions 9-11 based on the following diagrams of an international trade equilibrium between Australia and India.
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