2010 - summer - midterm

2010 - summer - midterm - University of British Columbia...

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University of British Columbia NAME:_____________ Department of Economics Economics 355 (921) STUDENTNUMBER:__________ International Trade Summer Session Term I, May 2010 Midterm Examination Time Allowed: 75 Minutes Total Marks: 60 ANSWER ALL PARTS OF THE EXAMINATION. PART A: Answer any 4 questions . Each question is worth 5 marks. 1. The following &gure shows the Production Possibilities Frontier for a country in a Heckscher Ohlin world. P 1 and P 2 are two di/erent relative prices ( P 1 = P C P F 1 and P 2 = P C P F 2 ). Labour is used intensively in the production of Cloth, Land is used intensively in the production of Food. Show how an increase in the Land endowment of a country (no change to Labour) will change the PPF. You should take care to show the points on the new PPF corresponding to the slopes, P 1 and P 2 . F C P 1 P 2 1
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2. Consider the following data regarding production of goods for two countries. (Assume a Ricardian world, hours of labour is the only input). Home Foreign Bicycles/hr 3 2 Snowboards/hr 8 4 In which country will wages be higher when there is free-trade? 2
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3. Under the assumptions of the Heckscher Ohlin model discussed in class, draw a graph showing the relation between the wage-rental ratio w r and the labour to land ratio L T in both Cloth and Food. Put L T on the horizontal ( this is not a typo ).
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2010 - summer - midterm - University of British Columbia...

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