Question
The above figure depicts a simplified two-country, two-product example of the Standard Neoclassical Trade Model. For the following questions, please refer to the figure above.
The above figure depicts a simplified two-country, two-product example of the Standard Neoclassical Trade Model. For the following questions, please refer to the figure above.
1. In autarky, which of the following is true about production and consumption?
a. Islandia produces and consumes 200 manufactured goods and 100 agricultural goods.
b. Continentia produces 400 manufactured goods and consumes 200 manufactured goods.
c. Islandia produces and consumes 100 manufactured goods and 200 agricultural goods.
d. Continentia produces and consumes 100 manufactured goods and 200 agricultural goods.
e. Other/None of the above.
2. In aurtarky, Continentia's marginal rate of transformation (MRT) = and Islandia's MRT = .
3. With specialization, which of the following is true?
a. Continentia is the low-cost producer of manufactured goods thus completely specializes in agricultural goods; Islandia is the low-cost producer of agricultural goods thus completely specializes in manufactured goods.
b. Continentia is the low-cost producer of agricultural goods thus completely specializes in agricultural goods; Islandia is the low-cost producer of manufactured goods thus completely specializes in manufactured goods.
c. Continentia is the low-cost producer of manufactured goods thus completely specializes in manufactured goods; Islandia is the low-cost producer of agricultural goods thus completely specializes in agricultural goods.
d. Continentia is the low-cost producer of agricultural goods thus completely specializes in manufactured goods; Islandia is the low-cost producer of manufactured goods thus completely specializes in agricultural goods.
e. Other/None of the above.
4. With specialization, relative to autarky, which of the following statements is true about total production?
a. Total production gains = 100 agricultural goods only.
b. Total production gains = 100 manufactured goods only.
c. There are zero production gains.
d. Total production gains = 100 manufactured goods and 100 agricultural goods
5. Which of the following is true about the terms of trade (TT)?
a. The slope has an absolute value of 1, so one agricultural good will be exchanged for one manufactured good.
b. It illustrates that only Continentia will gain from trade.
c. The slope has an absolute value of 2 in Islandia, and 0.5 in Continentia, so four agricultural goods will be exchanged for one manufactured good.
d. The slope has an absolute value of 2 in Islandia, and 0.5 in Continentia, so one agricultural good will be exchanged for four manufactured good.
e. Other/None of the above.
6. With free trade, which of the following is true about consumption?
a. Continentia gains 100 manufactured goods; Islandia gains 100 agricultural goods.
b. Each county gains 100 agricultural goods and 100 manufactured goods.
c. Only Continentia gains from trade.
d. Continentia gains 100 agricultural goods; Islandia gains 100 manufactured goods.
e. Other/None of the above.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started