final-eco101-05-A

final-eco101-05-A - Name Student ID Economics 101 —...

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Unformatted text preview: Name: Student ID: Economics 101 — Spring 2005 International Trade Final Exam June 9, 2005 Time: 120 minutes Total score: 120 points Student Consent for Release of Student Information (Buckley Waiver) I hereby authorize the UCSD Economics Department to return my graded examination by placing it in a location accessible to all students in the course. I understand that the return of my examination as described above may result in disclosure of personally identifiable information, which is not public information as defined in UCSD PPM 160-2, and I hereby consent to the disclosure of such information. Signature Date 1 Name: Student ID: 1 Trade of Multiple Goods: 10 minutes Home and Foreign can produce computers, almonds, and textiles with the following unit labor requirements. Home Foreign Computers a LC = 1 a * LC = 5 Almonds a LA = 2 a * LA = 1 Textiles a LT = 6 a * LT = 1 • Home wages exceed Foreign wages with w = 4 to w * = 1. In which good does Home have the strongest comparative advantage over Foreign? • Given a wage of ratio w/w * = 4, which good(s) will Home produce? Which good(s) will Home not produce? What does this let you infer about the pattern of trade? • Are the ratios a Li /a * Li for individual goods i opportunity costs? Why are the ratios appropriate to determine the patterns of trade? • Suppose wages equalize so that w/w * = 1. Are there gains from trade? 2 Name: Student ID: 2 Multiple Goods and Learning by Exporting: 10 min- utes Consider a Ricardian trade model with multiple goods and two trading countries, Home (no asterisk) and Foreign (asterisk). Suppose countries learn by exporting, and learning by exporting raises an exporter’s productivity so that its unit labor requirement a Li or a * Li falls. • In the graph below, state in which good Home has the strongest comparative ad- vantage and in which good Foreign has the strongest advantage. Which goods will Home export? Which goods will Foreign export? Are there goods that both countries produce? Why? • Suppose the learning potential in sectors 4 and 5 is largely exhausted, whereas learning in 1 and 2 is fast. Does learning by exporting change the pattern of trade? • Should the country specializing in sectors 4 and 5 resent trade? Discuss with reference to changing Terms of Trade....
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final-eco101-05-A - Name Student ID Economics 101 —...

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