E202_HW_1 - SUNGU ECO 202 HOMEWORK ASSIGNMENT #1 DATE...

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SUNGU – ECO 202 HOMEWORK ASSIGNMENT #1 DATE ASSIGNED: 09/20/2010 Solve all ten questions. Each question is worth 0.5 credit points for a total of 5% of your course credit. I want to see you work – in detail. While I do not expect [or demand] perfect answers, there will be no partial credit given for incomplete ones. Good Luck! #1 (Mankiw Ch.3 / Problem #7) Suppose that in a year an American worker can produce 100 shirts or 20 computers, while a Chinese worker can produce 100 shirts or 10 computers. a. Graph the production possibilities curve for the two countries. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graph. b. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graph. Which country would benefit from trade? Explain. c. Explain at what price of computers (in terms of shirts) the two countries might trade. d. Suppose that China catches up with American productivity so that a Chinese worker can produce 100 shirts or 20 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic well-being of the citizens of the two countries? #2 (Mankiw Ch.3 / Problem #8) An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes. a. Who has the absolute advantage in coffee? Explain. b. Who has the comparative advantage in coffee? Explain. c. If the two countries specialize and trade with each other, who will import coffee? Explain.
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This note was uploaded on 10/20/2011 for the course ECO 202 taught by Professor Normmiller during the Fall '08 term at Miami University.

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E202_HW_1 - SUNGU ECO 202 HOMEWORK ASSIGNMENT #1 DATE...

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