Econ 1014 exam 3 - 1 Suppose the United States decides to...

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Unformatted text preview: 1. Suppose the United States decides to open up to free trade with the rest of the world. If the United States does t om arative advantage in the production of car tires, then we can expect that with free trade: CD The domestic price of car tires will be equal to the world market price of car tires. 2/ (2) Total surplus earned in the car tire market in the United States will increase. (3) Production of car tires in the United States will fall. X (4) Consumers of car tires in the United States will benefit.)( (5) All of the above.)( 2. Suppose Brazil decides to open up to free trade with the rest of the world. If Brazil has a comparative advantage in the production of soybeans, then we can expect that with free trade: G Brazilian producers of soybeans will benefit.\/ (2) Total surplus earned in the soybean market in Brazil will decrease. 7( (3) Brazil will become an importer of soybeans. X (4) The price of soybeans in Brazil will remain unchanged from the price without free trade. X (5) All of the above. Figure 1: Rice Market PricetS) 2st ‘ E .. i 5 5 5 g .2 . 5 z 5 5 5 r Domestic; ‘ V r t g 5 5 , . - s . . = 5 3 5 : A = 2 x ‘ z ‘ . 2 a i , i ' 5 3 : . i ; 5 a ‘ . ‘ E z ' , , ; . tmwwmm ..... W.......... - g; : 5 . ‘ 5 i f l i z 13 . ,, . j — ,___,. Aw" : » 5 3‘ Mr. {‘4‘ . g . I g ‘ 5 ; QWPI-me a {*“W‘iw WW... 1 -- . 5 ' z ' 5‘ . 5 4 - 2' 5 - .3 i ' 5 ‘ 5 5 2 ~3- «mi ' 5 -—~;~—--+—-—- {W i " E g1 . .E . f i , E g 0 . . . 5 3 3 an... . 5..., : = , 5 5 ; 5) i0 20 30 40 5O 50 70 80 90 100 110 120 130 140 150 160 170 180 ‘ Quantity (in tons) . 9: Cw a Mao) = 540 cszvgutywww .70 D31: $11) ”(3)3540 @322 lzlfihofi: 230 El TS. ; 51.10 55% “-1080 132:6?“ J 230 24750 2% O 3. Refer to Figure 1. If the United States decides to open up to free trade with the rest of the world, it will: (1) Import 100 tons of rice. IQQ (2) Export 100 tons of rice. ’ZQ @ Import 50 tons of rice. 5 0 (4) Export 50 tons of rice. (5) Import 150 tons of rice. 4. Refer to Figure 1. If the United States decides to open up to free trade with the rest of the world, consumers will in consumer surplus. gain $420 1 CS ___ _l_ ._. w ( ) gain $330 79% 3 . 2( ”5020) fi 490 (3) lose $105 —'/‘ .3- ‘20 251,10 (4) lose $420 ‘ G 2/ lb r a 4/,[0 (5) None of the above. Ié (90 L{ ""6 4 5. Refer to Figure 1. If the United States decides to open up to free trade with the rest of the world, total surplus will: \ 0 increase by $150. DTS - T52“ T31 “HQ (2) decrease by $100. ; I240 __ “980 (030 (3) increase by $100. “ (CO (4) decrease by $75. ‘ "90 ‘ (5) stay the same. 6. Refer to Figure 1. What is the outcome of the economics surplus for domestic producers and consumers if the United States opens up to free trade (compared to the no-trade scenario)? (9' ) Domestic producers lose and domestic consumers win. (2) Domestic consumers lose and domestic producers win. (3) Both domestic consumers and producers win. (4) Both domestic consumers and producers lose. (5) There is insufficient information to determine the answer. 7. Refer to Figure 1. Suppose that the United States decides to impose a trade tariff in the amount of $2 per ton of rice. Compared to the free trade scenario. as a result of the tariff: (1) Domestic consumers will increase their quantity demanded by 10 unitsmfi' @ Domestic producers will increase their quantity supplied to 80 units.\/ ( 3) Imports of rice will decrease to 50 units. X (4) The domestic price of rice decreases to $6 per ton.)( (5) All of the above. ‘1. 8. Refer to Figure 1. Suppose that the United States decides to impose a trade tariff in the amount of $2 per ton of rice. This tariff creates a resource misallocation of: (1) 15 tons of rice too few consumed and 5 tons of rice too many produced domestically. (2) 5 tons of rice too few consumed and 15 tons of rice too many produced domestically. 8 15 tons of rice too few consumed and 10 tons of rice too many produced domestically. 10 tons of rice too few consumed and 10 tons of rice too many produced domestically. (5) None of the above. $0 v2.9 090 9% 901653,?) $3 ' 3:3, .0 /7n>’o x 6 0 fits 9-14 Suppose we have a simple model in which we have two countries (Germany and the US) which can each produce two goods (beer and pretzels). The following table illustrates the production possibilities for these two countries given their limited resources. Assume that resources are identical in roduction for both countries. Amount Produced in 1 Month US 5 q: 6 to 00 9. How much the US and Germany could produce in total if each was self-sufficient (did not specialize and trade) and spent exactly half of th oducin b er and half of the month producing pretzels? ; 35,2. (1) 240 bottles of beer and 250 bags of pretzels 2 )% ,‘Z/EZ-g 7' 136° '1 (2) 300 bottles of beer and 500 bags of pretzels 150 ’24} 4-,; ‘ ’7 b 2 S 0 (3) 120 bottles of beer and 250 bags of pretzels 3% a QB n so @ 270 bottles of beer and 500 bags of pretzels 17 f: (5) There is insufficient information to determine the outcome. 10. Who has Absolute Advantage in beer production, and who has the Absolute Advantage in pret l production? é Germany has the Absolute Advantage in beer production, and neither has the Absolute Advantage in pretzel production. \/ (2) US has the Absolute Advantage in beer production, and neither has the Absolute Advantage in pretzel productionfl (3) Germany has the Absolute Advantage in beer production, and US has the Absolute Advantage in pretzel production. X (4) US has the Absolute Advantage in beer production, and Germany has the Absolute Advantage in pretzel production. )4 (5) Germany has the Absolute Advantage in beer production, and Germany has the Absolute Advantage in pretzel production. X 3 x .30 o é l 1. What are the o nit costs of roducin a bottle of beer for the two countries? 6“ “a“, G he opportunity cost of producing a bottle of beer is the loss of 2.08 bags of pretzels for the US and 1.67 bags of pretzels for Germany. ~/ (2) The opportunity cost of producing a bottle of beer is the loss of 0.48 bag of pretzel for the US and 0.6 bags of pretzels for Germany. w< (3) The opportunity cost of producing a bottle of beer is the loss of 2.08 bags of pretzels for the US and 0.6 bags of pretzels for Germany. X (4) The opportunity cost of producing a bottle of beer is the loss of 0.48 bag of pretzels for the US and 1.67 bags of pretzels for Germany. X (S) The opportunity cost of producing a bottle of beer is the loss of 0.8 bag of pretzel for the US and 1 bag of pretzels for Germany. x 12. Which of the following statement is true? W)‘ meme, ( 1) Germany has the Comparative Advantage in producing both beer and pretzels.)< (2) US, has the Comparative Advantage in producing both beer and pretzels. 7k 9 Germany has the Comparative Advantage in producing beer and US has the Comparative Advantage in producing pretzels. \/ (4) US has the Comparative Advantage in producing beer and Germany has the Comparative Advantage in producing pretzels. ‘X (5) Neither country has the Comparative Advantage in producing pretzels. 2% ’0 33‘ SOoO 13. What would be the total amount of beer and pretzels produced in the specialization-trade scenario? ( l) 240 bottles of beer and 500 bags of pretzels. Q 300 bottles of beer and 500 bags of pretzels. (3) 540 bottles of beer and 1000 bags of pretzels. (4) 270 bottles of beer and 500 bags of pretzels. (5) Information is not sufficient for answering the question. 14. What is the “gain from trade” if both countries specialize and trade, compared to the self- sufficient scenario in which each country spends exactly half of the month producing beer and half of the month producing pretzels? (l) 60 bottles of beer and none of pretzels (2) 30 bottles of beer and 250 bags of pretzels (3) 60 bottles of beer and 250 bags of pretzels (4 30 bottles of beer and none of pretzels é None of the above Table 1 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Labor Hours Needed to Make l "— 15. Refer to Table 1. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is o 4 5 i (l) 28 coolers and 50 radios. Q 1, o I Ill 6 57 40 2 30 coolers and 9 radios. ‘9‘ I 60 coolers and 18 radios. .34 '0 (4) 120 coolers and 36 radios. (”if (5) None of the above. Figure 2 On the diagram below, Q represents the quantity of cars and P represents the price of cars. Domestic supply World price Domestic demand Q l6. Refer to Figure 2. The price corresponding to the horizontal dotted line on the graph represents the price of cars (1) after trade is allowed. Q before trade is allowed.\/ (3) that maximizes total surplus when trade is allowed. (4) that minimizes the well-being of domestic car producers when trade is allowed. -- ‘ (5) either before or after trade is allowed. 17. Suppose the country of Utopia is currently producing on its Production Possibilities Frontier (PPF). If this is the case, then we can say that: Utopia is currently using all its resources as efficiently as possible. \/ (2) An earthquake that destroys half of Utopia’s highways will result in a shift outwards of its PPF. \( I (3) Utopia can produce more of one good without reducing its production of another good. (4) All of the above. (5) None of the above. 18-20. The following figure is a Production Possibilities Frontier (PPF). Good 1 Good 2 18. Consider PPF 1 only. Which of the following statement is FALSE? (1) Point A is currently not possible to produce. T (2) Point B is currently possible to produce but is not efficient. T (3) Point C is efficient. l (4) All points on the PPF are possible and efficient. T‘ @ Resources are identical in production}" 19. An economic growth can be represented by which of the following? (1) A change from point B to point C, given PPF 1 only X (2) Achange from PPF 2 to PPF l X . ® A change from PPF 1 to PPF 2/ (4) A change from pointA to point C, given PPF 2 onlyX (5) None of the above 20. Consider PPF 2 only. Which of the following could be a reason for the movement from point B to point A? (l) A higher Unemployment rate \4 (2) An earthquake that destroys a lot of farming land y (3) The government shutting down all universitiesvk ‘7 ® More efficient use of current resources ’ \m / (5) Both (3) and (4) 54 '5 21. Compared with the free trade scenario, which of the following statements about tariffs and binding quotas are true? (1) Both tariffs and quotas create a deadweight loss for society. \/ (2) Both tariffs and quotas increase producer surplus. \/ Both tariffs and quotas result in higher domestic prices. / All of the above. (5) None of the above.)L 22. Suppose the US. currently imports 10 million car tires. A Presidential candidate trying to garner support for his/her campaign proposes an import quota of 200 on car tires. According to this information, (1) Total surplus will increase in the United States. X (2) Buyers of car tires in the United States should be indifferent, since their economic surplus will remain the same. (3) US. producers of car tires will most probably oppose this idea. X The price of car tires in the United States will increase. (5) All of the above.)L Figure 3 Price of Carnations Domestlc Supnly $14 12 2 Domestic 100 200 ‘300 74190 500 600 a; ' Quantity of ‘ Camatlons (in dozens) 23. Refer to Figure 3. With trade and without a tariff, (1) the domestic price is equal to the world price. ~- (2) camations are sold at $8 in this market. 1 (3) there is a shortage of 400 camations in this market. - (4) this country imports 200 camationsx None of the above. 24. Refer to Figure 3. Before the tariff is imposed, this country (1) imports 200 camations. ‘© imports 400 camations. 330 (3) exports 200 camations. ,\OO ' (4) exports 400 camations. {9.5 (5) None of the above. 25. Refer to Figure 3. The size of the tariff on camations is (1) $8 per dozen. $6 per dozen. ( ) $4 per dozen. (4) $2 per dozen. (5) None of the above. 26. Refer to Figure 3. The imposition of a tariff on camations (1) increases the number of camations imported by 100. (2) increases the number of camations imported by 200. L“) ? decreases the number of camations imported by 200. -. 20C) ( decreases the number of camations imported by 400. _/“ (5) None of the above. '2‘90 27. Refer to Figure 3. The amount of revenue collected by the government from the tariff is (1) $200. $400. 10% $500. - X/_. (4) $600. by) 6 (5) None of the above. 28. Refer to Figure 3. When a tariff is imposed in the market, domestic producers 0 gain by $100. (2) gain by $200. (3) gain by $300. (4) lose by $100. (5) None of the above. 29. Refer to Figure 3. Compared with the free trade scenario, the amount of deadweight loss caused by the tariff equals . (1) $100. ONL: 2 (i 175(le a 79° v‘ 2 $200. $400. a a (4) $500. grflw f1 J 02 (5) None of the above. (7; /. l 0 1 0 0 30. Refer to Figure 3. Compared with the free trade scenario, when the tariff is imposed, domestic consumers ”M ( I) lose by $500. (2) lose by $900. (3) gain by $500. (4) gain by $900. 9 None of the above. fl// ...
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