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U.S.

Wheat - 4 bushels/hour

Cloth - 2 yards/hour

U.K.

Wheat - 1 bushels/hour

Cloth - 3 yards/hour

4. The above table shows you the productivities of wheat and cloths for U.S. and U.K. workers. Given these information, answer the following questions: (a) Suppose U.S. and U.K. are open to trade according to comparative advantage. When one unit of wheat is traded, what is the range of mutually agreeable/beneficial trade in terms of cloth? (b) What is the dollar price of wheat and cloth in the U.S. if the wage rate is $6? (c) What is the dollar price of wheat and cloth in the U.K. if the wage rate is £1 and the exchange rate between dollars and pounds is $5 for £2? (d) How would U.S. and U.K. trade according to prices of wheat and cloth rather than the comparative advantage? Show all work.

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Samantha Balando
Samantha BalandoLv7
28 Sep 2019

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Related questions

For which of the following nations does international trade account for the largest percentage of GDP?
A) Japan
B) The Netherlands
C) Germany
D) Great Britain
E) the United States

2. Suppose that workers in Transylvania can produce only two goods-- yo-yos or sweat socks. The Transylvanian currency is the dealer. In what unit is the opportunity cost of yo-yos measured?
A) dealers
B) dealers per yo-yo
C) dealers per sweat sock
D) yo-yos
E) sweat socks

3. For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
A) The opportunity cost of producing watches is lower in Denmark.
B) The opportunity cost of producing cheese is lower in Denmark.
C) The opportunity cost of producing watches is identical in both countries.
D) It is impossible to compare opportunity costs because the two countries use different currencies.
E) In Germany the opportunity cost of producing one pound of cheese is one watch.

4. For each bow the Romans are producing, they give up the opportunity to make 10 arrows. The Dacians are giving up producing2 bows for every 40 arrows they are producing. Which of the following is true regarding comparative advantage?
A) The Romans have a comparative advantage in producing arrows
B) The Romans have a comparative advantage in producing bows
C) The Romans have a comparative advantage in producing arrows and bows
D) The Dacians have a comparative advantage in producing arrows and bows
E) The Dacians have a comparative advantage in producing bows

5. Which of the following is not a basis for trade between two nations?
A) different skill levels of the labor forces
B) one nation's absolute advantage
C) a difference in tastes between countries
D) economies of scale
E) different capital stocks

6. The opportunity cost of producing one car in Germany is 2,000bushels of wheat, and the opportunity cost of producing one car in Canada is 1,200 bushels of wheat. The two countries can realize mutual gains from trade if they agree on terms of trade that are
A) greater than 2,000 bushels of wheat per car
B) less than 1,200 bushels of wheat per car
C) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and Germany produces wheat
D) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and Germany produces cars
E) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and each country produces both goods

7. The rate at which two countries trade one good for another
A) is known as the foreign exchange rate
B) is known as the terms of trade
C) is known as the export line
D) equals the slope of the import line
E) equals the common slope of the countries' production possibilities frontiers

8. Which of the following is true?
A) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
B) International trade requires that a country's production possibilities exceed its consumption possibilities.
C) A country's production possibilities always equal its consumption possibilities.
D) A country's consumption possibilities can never equal its production possibilities because of leakages in the system.
E) As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade.

9. Which of the following is not a reason for international specialization?
A) some countries have educated, trained workers, while other countries have unskilled workers
B) tastes and preferences tend to be different in different countries
C) economies of scale can allow larger, specialized producers to operate at a lower average cost
D) mineral resources are often concentrated in particular countries
E) the world price of a good is determined by the world supply and demand for it

10. Ad valorem tariffs on imports are based on a percentage of an import's value; specific tariffs are based on a lump sum per physical unit imported.
A) True
B) False


Wine Cheese

France

Wine - 2 hours/barrel
Cheese - 4 hours/pound

Italy

Wine - 6 hours/barrel

Chese - 10 hours/pound

1. The above table shows you the productivities of wine and cheese for French and Italian workers. Given these information, answer the following questions: (a) Which country has the comparative advantage in the production of wine? Which country has the comparative advantage in the production of cheese? (b) Suppose France and Italy are open to trade according to comparative advantage. When one unit of wine is traded, what is the range of mutually agreeable/beneficial trade in terms of cheese? Show all work.

1.In the Ricardian model, wages are equal across industries because:

A.employers care for their workers.

B.workers prefer to work in exporting industries.

C.workers are freely mobile between industries.

D.workers are freely mobile between countries.

2.Suppose that the U.S. price index for its imports rose from 100 to 120 from 2010 to 2011 and the price index for its exports remained unchanged. Which of the following statements is CORRECT?

A.The U.S. terms of trade worsened between 2010 and 2011.

B.The U.S. terms of trade improved between 2010 and 2011.

C.The U.S. terms of trade improved in 2010 and worsened in 2011.

D.There was no change in the U.S. terms of trade between 2010 and 2011.

3.Assume that marginal product of labor is constant. If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with a MPLcloth = 2, what is the MPLcorn?

A.4

B.5

C.6

D.7

4.Suppose after opening up for trade the Home country produces 60 units of chemicals and 20 units of clothing. But Home consumes 40 units of chemicals and 60 units of clothing. What is the international price of chemicals?

A.1/2 unit of clothing per unit of chemicals

B.one unit of clothing per unit of chemicals

C.two units of clothing per unit of chemicals

D.three units of clothing per unit of chemicals

5.It can be shown that differences in “before-trade” relative prices will determine:

A.which nation has the absolute advantage.

B.which good each nation will export or import.

C.the quantity traded by each nation.

D.which nation has higher wages.

6.Suppose after opening up for trade the Home country produces 60 units of chemicals and 20 units of clothing. But Home consumes 40 units of chemicals and 60 units of clothing. Which product does Home export?​

A.Clothing

B.Chemicals

C.It exports neither chemicals nor clothing.

D.It exports both chemicals and clothing.

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