Time allowed : 1.5 hours
Instructions
Semester 1 2019 Page 1 of 10
CONFIDENTIAL EXAM PAPER This paper is not to be removed from the examination room.
Copyright By Assignmentchef assignmentchef
Student ID No. : _______________________________________________________
Middle of Semester 1 2019
ECOS 3006 International Trade
1. This examination consists of two parts (A and B). Part A is worth 15 points. Part B is worth 20 points. The whole exam is worth 35 points.
2. Answer all 15 multiple choice questions in Part A by marking the computer cards provided. Unanswered, incorrect or multiple answers are given a mark of zero. Do not cross on the computer cards.
3. Answer part B in the space provided. Your answers should reflect your work. Answers with no explanation receive zero credit. Allocate your time wisely: do the questions that are easier for you first.
4. Programmable calculators are not allowed
5. Please check your examination paper is complete (10 pages) and indicate you have
done this by signing below.
6. I have checked the examination paper and affirm it is complete.
Date: _____________
Cloth Home 10
Foreign 10 3) Choose the correct answer:
a. b. c. d.
4) If a. b.
a. b. c. d.
Home has a comparative advantage in cloth.
Foreign has a comparative advantage in cloth.
Home has a comparative advantage in wheat.
Home has a comparative advantage in both products.
the world relative price of cloth (Pclothw / Pwheatw) equals 1/2
both countries could benefit from trade with each other.
neither country will want to export the good in which it enjoys comparative advantage.
Home cannot benefit from trade.
Foreign cannot benefit from trade.
the Domestic economy experienced a great improvement in production technologies, so that the unit labor requirement for cloth was reduced to 5, then Home could gain from trade by
exporting cloth.
exporting wheat.
exporting both and importing nothing. none of the above.
Semester 1 2019
Page 2 of 10
MULTIPLE CHOICE QUESTIONS ANSWER ALL 15 QUESTIONS BY MARKING THE COMPUTER CARDS PROVIDED
1) In the Heckscher-Ohlin model, the capital-intensive industry
a. always uses more labor than the labor-intensive industry.
b. never uses more labor than the labor-intensive industry.
c. uses less workers per unit of capital compared to labor-intensive industry for
any given ratio of wages to the rental rate. d. none of the above.
2) Factor price insensitivity theorem predicts that when a capital-abundant country experiences migration
a. relative factor prices will not change. b. the real wage will increase.
c. the real rental rate will increase.
d. none of the above.
Using the following information, answer questions 3)-5)
Labor Requirements to Produce One Unit
a. b. c. d.
a. b. c. d.
a. b. c. d.
a. b. c. d.
the product in which its
labor productivity is relatively low. labor productivity is relatively high. labor mobility is relatively low. labor mobility is relatively high.
the Heckscher-Ohlin model, if the price of the labor-intensive product rises, real wage will
Does not change
Decrease but less than rental rate
the Heckscher-Ohlin model, if Japan has less land per worker, and Australia has more land per worker, then if trade were to open up between these two countries,
the real income of land owners in Australia would rise. the real income of labor in Australia would rise.
the real income of labor in Japan would fall.
the real income of landowners in Japan would rise.
Japan has a comparative advantage in production of manufactured goods and Australia has a comparative advantage in food production, then starting trade between these two countries will
lead to perfect specialization with Japan alone producing manufacturing output. create a world relative price of food that is lower than that of Australia.
raise the relative price of food in both countries.
None of the above.
Semester 1 2019 Page 3 of 10
6) According to the Ricardian model, a country will have a comparative advantage in
10) If Thailand receives an inflow of migrants, the specific-factors framework suggests that capital owners in Thailand will _______ and workers in Thailand will _______ .
a. lose; benefit
b. benefit; lose
c. lose; lose
d. benefit; benefit
Semester 1 2019 Page 4 of 10
11) If Cuba is not involved in trade, the figure implies that Cuba should _______ when it is offered the opportunity to trade.
Quantity of Toasters
a. specialize in the production of toasters and export bicycles
b. specialize in the production of bicycles and import toasters
c. remain self-sufficient, refusing to export or import
d. specialize in the production of both goods
12) In this question the subscript (l) refers to lawnmowers, while the subscript (c) refers to clothes.
Home Country Foreign country
MPLc =2 L=60 MPLl =1 MPL*c=5L*=30 MPL*l =2
What is the no-trade relative price of clothes to lawnmowers in the Home country? a. 1/60
b. 60/1 = 60 c. 12
13) The volume of US car imports is 3 trillion dollars and the volume of exports is 2 trillion. The index of intra-industry trade is then equal to
b. 40% c. 60% d. 100%
14) Before trade, the wage-rental (w/r) ratio is lower in Pakistan than it is in the Philippines. If the conditions of the Heckscher-Ohlin model of trade are met, a movement from no trade to free trade implies that
a. Pakistan will export the labor-intensive good.
b. The Philippines will export the labor-intensive good.
c. The Philippines will export both labor- and capital-intensive good.
d. It is not possible to determine the direction of trade without more information.
15) To measure U.S. Effective factor endowment in the case of workers, the appropriate measure is:
World Trade Price Line
Quantity of Bicycles
Semester 1 2019 Page 5 of 10
a. (US Endowment of Labor Force)
b. (US Endowment of Labor Force)*(US Labor Productivity)
c. (US Endowment of Labor Force)/(Land Endowment)
d. (US Endowment of Labor Force)/(Total Value of US non-Labor Endowments)
Semester 1 2019 Page 6 of 10
ANSWERS WITHOUT EXPLANATION RECEIVE ZERO CREDIT
For questions 1-3 assume that Vietnam and the U.S. are engaged in trade in shoes and computers. Below is the table that represents marginal products of labor in both countries and industries:
MPL Shoes Computers USA 2 4
Vietman 1 1
Assume further that the U.S. economy is much larger than Vietnamese Economy
1. (2 points) What will be autarky prices in the U.S. and Vietnam? Explain. Draw autarky PPFs in both countries.
SHORT ANSWER QUESTIONS
Semester 1 2019 Page 7 of 10
2. (5 points) Given the assumption that the U.S. economy is much larger than the Vietnamese economy, what do you expect the world price will be in trade equilibrium? Support your answer with the diagram of world export supply and import demand for shoes.
Semester 1 2019 Page 8 of 10
3. (5 points) Draw PPF diagrams for Vietnam and the U.S. Label production and consumption points, export and import volumes. Assume that shoes are on the vertical axis and computers are on the horizontal one.
Semester 1 2019 Page 9 of 10
For questions 4 and 5 assume that Czech Republic produces two goods: cars that require labor and specific input capital and beer that requires labor and specific input land.
4. (4 points) Assume that the world price of beer increases. What will happen to employment and output in both sectors in the short run? What will be the effect on nominal and real wages and rental rates? Support your arguments with a box diagram.
Semester 1 2019 Page 10 of 10
5. (4 points) Now assume that the world price of beer has not changed and instead this industry experienced a technological breakthrough invention of microbreweries that dramatically decreased costs of production of craft beer. Show again what will be the effect on output, employment, wages and rental rates and support your answer with a box diagram. How is your answer different from what you had in question 4?
CS: assignmentchef QQ: 1823890830 Email: [email protected]
Reviews
There are no reviews yet.