International trade Questions

Consider a world economy with two countries, Horne and Foreign, and two goods, Computers and Footballs. The autarky equilibrium prices in the two countries are given by: DA = 2 in the Home country and pA \" = 1 in the foreign country. which of the following cannot be an equilibrium trade price .7 pT=1.5 ' pT= 1.7 ' pT= 1.9 \" pT=2.1 QUESTION 8 Consider a small open economy, where preferences are described by the following utility function: U= C1 I2F1 /2 and the equilibrium autarky price is equal to pA = 1. Suppose that when the country opens to trade, the free trade price is equal to pT= 2' The utility of the average consumer is higher in the world with free trade than under autarky. ' True False QUESTION 9 Consider a small open economy, where preferences are described by the following utility function: U= C1 /2F1 [2 and the equilibrium autarky price is equal to pA = 1. Suppose that when the country opens to trade, the free trade price is equal to pT= 2 Now suppose that all of a sudden, the terms of trade deteriorate such that pT goes from 2 to 1.5 The utility of the average consumer is higher after the change in the terms of trade. ' True ' False QUESTION 1 0 T Consider a world economy with two countries, Horne and Foreign, and two goods, Computers and Footballs. Let's assume that pA