Globalization and Trade Problem Set[1]

Use the following table to answer questions 1 through 12.

The table below describes the production possibilities for Mexico and Nigeria. Each number in the table shows the number of workers needed to produce one unit of the product.

Country

Shoes

Glasses

Mexico

10

12

Nigeria

18

5

1. Suppose that both countries have 90 workers. What is the opportunity cost of producing Shoes in Mexico?

__________ Glasses

2. Suppose that both countries have 90 workers. What is the opportunity cost of producing Glasses in Mexico?

__________ Shoes

3. Suppose that both countries have 90 workers. What is the opportunity cost of producing Shoes in Nigeria?

__________ Glasses

4. Suppose that both countries have 90 workers. What is the opportunity cost of producing Glasses in Nigeria?

__________ Shoes

5. Suppose that both countries have 90 workers. Which country has an absolute advantage in producing Shoes?

a.Nigeria

b.Neither country

c.Mexico

6. Suppose that both countries have 90 workers. Which country has an absolute advantage in producing Glasses?

a.Nigeria

b.Neither country

c.Mexico

7. Suppose that both countries have 90 workers. Which country has a comparative advantage in producing Glasses?

a.Nigeria

b.Neither country

c.Mexico

8. Suppose that both countries have 90 workers. Which country has a comparative advantage in producing Shoes?

a.Nigeria

b.Neither country

c.Mexico

9. Suppose that both countries have 90 workers. Which country should be specializing in the production of Glasses?

a.Nigeria

b.Neither country

c.Mexico

10. Suppose that both countries have 90 workers. Which country should be specializing in the production of Shoes?

a.Nigeria

b.Neither country

c.Mexico

11. Suppose that both countries have 90 workers. Which country should be exporting Shoes?

a.Nigeria

b.Neither country

c.Mexico

12. Suppose that both countries have 90 workers. Which country should be exporting Glasses?

a.Nigeria

b.Neither country

c.Mexico

Use the following graph to answer questions 13 through 20.

The graph below shows the supply and demand curves and the world price for bagels.

13. What is the equilibrium price if this country does not trade?

14. What is the equilibrium quantity if this country does not trade?

15. What is the world price?

16. What is domestic quantity demanded at the world price?

17. What is the amount of the domestic supply at the world price?

18. At this world price, this country will

a.Import bagels

b.Neither import nor export

c.Export bagels

19. What is the amount of imports at the world price?

20. What is the size of the gains from trade at the world price?