In the table above, if trade were to occur, which of the following is true?
Homework Set #8 – ECN 212 – Dr. Roberts
Homework Set #8 must be submitted online no later than
Wednesday, April 27, 2016 @ 8:59 p.m.
Production Possibilities Schedule
Country XCountry Y
ChoiceSugarCoffeeSugarCoffee
A 200 0 100 0
B 160 40 80 30
C 120 80 60 60
D 80 120 40 90
E 40 160 20 120
F 0 200 0 150
1. In the table above, if trade were to occur, which of the following is true?
a. Country X should export sugar to country Y, and country Y should export coffee to country X.
b. Country X should export coffee to country Y, and country Y should export sugar to country X.
c. Country Y should export sugar and coffee to country X.
d. Country X should export coffee to country Y, but the two countries should not exchange sugar.
e. Country X should export sugar and coffee to country Y.
2. In the table above, if trade were to occur, what is the most country Y is willing to pay for 1 unit of sugar?
a. 1/2 unit of coffee
b. 3/2 units of coffee
c. 2/3 unit of coffee
d. 1 unit of coffee
e. 150 units of coffee
3. In the table above, if trade were to occur, what is the least country X is willing to accept for 1 unit of sugar?
a. 3/2 units of coffee
b. 1/2 unit of coffee
c. 2/3 unit of coffee
d. 1 unit of coffee
e. 200 units of coffee
4. In the table above, assume that before specialization and trade, both countries were producing at production possibility C. Now if each country specializes completely according to comparative advantage, what will be the gains from trade?
a. 20 units of coffee and 10 units of sugar
b. 20 units of sugar and 10 units of coffee
c. 10 units of sugar
d. 80 units of coffee and 90 units of sugar
e. 20 units of coffee
5. A world-renowned brain surgeon can type twice as fast as her secretarial assistant. Which of the following best describes the idea of comparative advantage in this situation?
a. The secretary has an absolute advantage in typing.
b. The surgeon should work weekends and evenings to stay up on her typing and fire the assistant.
c. The surgeon should do her own typing to save money.
d. The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the surgeon has a comparative advantage in typing.
e. The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the secretary has a comparative advantage in typing.
6. Which of the following statements about international trade restrictions is true?
a. They typically benefit foreign producers at the expense of domestic consumers.
b. They ensure that countries will specialize in those products which they can produce most efficiently.
c. In the majority of cases they harm consumers.
d. They ensure that only efficient producers survive.
e. They ensure that higher-quality goods are provided at lower prices.
7. Typically, restrictions to “save domestic jobs” simply redistribute jobs by creating
a. conditions that favor domestic labor unions at the expense of employment in nonunionized industries.
b. employment in the protected industry and reducing employment elsewhere.
c. inflation in the overall economy.
d. pockets of full employment and unemployment corresponding to free trade zones.
e. employment in nonprotected industries and reducing employment in the protected industry.
8. If the world price of a good is lower than its domestic equilibrium price, the country will
a. export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
b. import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers.
c. import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
d. import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.
e. import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically.
9. Refer to the figure above. How much corn would be imported if the world equilibrium price is P1?
a. Q5 – Q3
b. None
c. Q3 + Q1
d. Q5 – Q1
e. Q3 – Q1
10. Refer to the figure above. If the world price of corn is P1 and a tariff equal to P2 – P1 is imposed on each ton of imported corn, which of the following is not true?
a. Imports will decrease to Q4 – Q2.
b. The government will collect (P2-P1)(Q4-Q2) in revenue.
c. There will be a loss of domestic consumer surplus.
d. There will be a loss of domestic producer surplus.
e. The price will increase.
11. Assume that the world price of corn is P1 in the figure above. What would be the effect on imports of corn if a tariff equal to P3 – P1 is imposed on each ton of imported corn?
a. Imports of corn would be reduced by an amount equal to Q4 – Q2.
b. Imports of corn would be reduced by an amount equal to Q5 – Q3.
c. Imports of corn would be completely eliminated.
d. Imports of corn would be reduced by an amount equal to Q4 – Q3.
e. Imports of corn would be reduced by an amount equal to Q3 – Q1.
12. Refer to the figure above. If the world equilibrium price is P1 and a quota of (Q4-Q2) is imposed
a. price will be P2.
- domestic producers will supply Q2.
- total tariff revenue is zero.
d. domestic consumers will lose consumer surplus
e. All of these answers are true.
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