final-eco101-10

final-eco101-10 - Name: Student ID: Economics 101 Fall 2010...

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Unformatted text preview: Name: Student ID: Economics 101 Fall 2010 International Trade Final Exam December 10, 2010 Time: 110 minutes Total score: 110 points Carefully read the instructions of each question. Words in bold indicate that you need to respond to the request or question. Whatever you answer, also provide a brief explanation. Permissible objects during the exam: pencils, pens, one ruler, one eraser. All other objects must be outside your immediate reach at all times during the exam. I hereby authorize the UC San Diego Economics Department to return my graded exam- ination 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 UC San Diego PPM 160-2, and I hereby consent to the disclosure of such information. Name Date 1 Name: Student ID: 1 Unbalanced Growth and Trade: 10 minutes Consider a Ricardian trade model with two industries: cheese C and wine W . There are two countries: Home (no asterisk) and Foreign (asterisk). The diagram depicts an equilibrium with complete specialization in both countries. P C / P W Relative supply and demand of cheese R e l a t i v e w o r l d p r i c e o f c h e e s e a LC / a LW Q C +Q * C Q W +Q * W a * LC / a * LW Relative Supply Relative Demand Relative Supply L / a LC L / a * * LW The home country experiences productivity growth in its exports sector, cutting its unit labor requirements for the exports good in half (but leaving all other unit labor requirements unchanged). What is the home countrys export good? So, which unit-labor requirement variable drops? Depict the effect(s) of this productivity growth on the relative supply curve. Depict the new world price ratio. Do the home countrys terms of trade improve or worsen? Can it happen that the home country starts producing the previously imported good? Explain . 2 Name: Student ID: 2 Unbalanced Growth and Welfare: 10 minutes Consider again a Ricardian trade model with two industries: cheese C and wine W . There are two countries: Home (no asterisk) and Foreign (asterisk). The diagram depicts the initial Home and Foreign production possibility frontiers Q C ,Q C Home and Foreign cheese production H o m e a n d F o r e i g n w i n e p r o d u c t i o n Q W ,Q W * * L / a LC L / a LW L / a * * LC L / a * * LW Depict the world trade lines for each country and the production pattern for each country under complete specialization. The home country experiences productivity growth in its exports sector, cutting its unit labor requirements for the exports good in half (but leaving all other unit labor requirements unchanged)....
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final-eco101-10 - Name: Student ID: Economics 101 Fall 2010...

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