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sample_midterm1_answers - 2 a Graphs omitted b 2 1.5...

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Economics 436 Fall 2011 Answer Key to Sample Midterm I I. 1. d 2. a 3. c 4. a 5. c 6. d 7. b 8. b II. 1. T 2. T 3. T 4. F 5. F 6. T III. 1. a. The numbers in the last column are: 5, 1.5, 2/3, 4. b. Brazil will specialize in coffee and figs. Argentina will specialize in dill and eggs. The ratio w/w* must fall into the interval (1.5, 4). c. This might cause the range of goods produced by Brazil to increase. Refer to Fig. 3-5 on p. 46 of the text. An increase in Brazil’s labor supply will cause the RS curve (for labor) to shift to the righ t. If the shift is large enough so that w/w* falls below 1.5, then Brazil will also produce dill.

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Unformatted text preview: 2. a. Graphs omitted. b. 2, 1.5, Foreign. c. See graph on next page: d. 2, beer, fish. e. 3 f. No, Home does not gain from trade, because its PPF remains the same as before. Yes, Foreign does gain from trade, because its PPF shifts out (still 100 fish maximum, but now 200 rather than 150 beer maximum.) 3. a. land, labor b. Toys will use 60 units of land, 180 units of labor. Wool will use 40 units of land, 20 units of labor. (graph omitted) c. The ratio T/L will fall in both industries. The lines that you draw in the resource box in (b) will become flatter. Maldonia will produce few toys and more wool....
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sample_midterm1_answers - 2 a Graphs omitted b 2 1.5...

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