1.Consider the motorcycle market displayed on

the graph above. Answer the next 3 questions based on this graph. 

What happens to the equilibrium price and quantity if there is a rise in incomes due to an expansion?

A.Right shift in demand and supply; quantity increases, price is indeterminate.

B.Right shift in supply; equilibrium price declines, quantity rises.

C.Left shift in demand; both equilibrium price and quantity decline.

D.Right shift in demand; both equilibrium price and quantity rise.

2.What happens to equilibrium quantity and price if government builds new roads for only motorcycles to provide a faster transportation. 

A.Demand shifts to the right, both price and quantity rise.

B.Supply shifts to the right; price declines, quantity increase.

C.Demand shifts to the left; both price and quantity rise.

D.Both supply and demand shift to the right; quantity rises, price is indeterminate

3.What happens to equilibrium price and quantity if we invent an improvement in the motorcycle production technology?

A.Right shift in demand; both price and quantity rise.

B.Right shift in supply; price declines, quantity rises. 

C.Left shift in demand; both price and quantity decline.

D.Left shift in supply; price rises, quantity declines.

4.Consider the above graphs which depict the trade between the US and ROW. Answer the next 2 questions based on this graph. 

What is the equilibrium international price?

A.0.75 C/W

B.1/2 W/C

C.1 W/C

D.2 W/C

5.Suppose that the equilibrium international cloth price is 1.2 W/C instead of 1W/C.  At the equilibrium international price of 1.2 W/C, does the US probably gain more or less from free trade (than it would if, instead, the equilibrium international price is 1 W/C)? How about the ROW?

A.Both US and ROW gain more.

B.US gains less, ROW gains more.

C.Both US and ROW gain less.

D.US gains more, ROW gains less

6.If a country does not have any absolute advantage, this country cannot engage in international trade. TRUE OR FALSE EXPLAIN.

7.When two countries engage in international trade, equilibrium international price will be between these two countries’ domestic prices. TRUE OR FALSE EXPLAIN.

8.Trade exploits a country and makes it worse off as its workers receive much lower wages than the workers from other countries. TRUE OR FALSE EXPLAIN.

9.Price elasticity of quantity demanded is positive. TRUE OR FALSE EXPLAIN

10.Price elasticity of quantity supplied is positive. TRUE OR FALSE EXPLAIN

11. An indifference curve shows the various combinations of consumption quantities that lead to the same utility level. TRUE OR FALSE EXPLAIN

 

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