This is the question in this Answer whether the following statements are true or false. Justify you answer. One mark for a correct true/false answer and 2 marks for a correct justification.

a.(3 marks) Consider the following representation of the Ricardian Model. Two countries, Peru and India, produce two products - silk and aluminium. Total labour supply in Peru is 160 and the total labour supply in India is 80. The table provides the marginal product of labour ( ) to produce silk and aluminium in each country.

India has the absolute advantage in producing silk and aluminium. Then, Peru is less efficient at producing both products compared to India.

True or False? Explain.

Answer:

b.(3 marks) Consider the Ricardian Model displayed in point (a). Peru has the comparative advantage in producing silk, while India has the comparative advantage in producing aluminium.

True or False? Explain.

Answer:

c.(3 marks) Consider the Specific Factors Model and suppose that land is specific to agriculture, capital is specific to manufacturing, and labour is mobile between sectors. The labour market is in equilibrium, i.e., the wage rate is the same in these two sectors. Then, a decrease in the price of manufacturing products (keeping the price of agricultural products constant), produces a shift of workers between sectors that leads to a decrease in Marginal Product of Labour (MPL) in the manufacturing sector.

True or False? Explain

Answer:

d.(3 marks) Consumers in a large economy are benefited by a tariff when the tariff improves the country's terms of trade.

True or False? Explain.

Answer:

e.(3 marks) The two key variables of the gravity model are countries' economic size and the geographical distance between trade partners. Although geographical distance between trade partners is associated with transportation costs, the gravity model is very effective in predicting trade volume of services between countries.

True or False? Explain.

Answer:

AutoSave (. Off ) IBUSIBE - Take-home Exam S1 2021 - Protected View - Saved to this PC LO pall1 1 13 @outlook.com P X File Home Insert Draw Design Layout References Mailings Review View Help Grammarly Share Comments i PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing X Question 1 15 marks (3+3+3+3+3) Answer whether the following statements are true or false. Justify you answer. One mark for a correct true/false answer and 2 marks for a correct justification. a. (3 marks) Consider the following representation of the Ricardian Model. Two countries, Peru and India, produce two products - silk and alu im. Total labour supply in Peru is 160 and the total labour supply in India is 80. The table provides the marginal product of labour (MPL) to produce silk and aluminium in each country. Peru India 30 Aluminium India has the absolute advantage in producing silk and aluminium. Then, Peru is less efficient at producing both products compared to India. True or False? Explain. Answer: b. (3 marks) Consider the Ricardian Model displayed in point (a). Peru has the comparative advantage in producing silk, while India has the comparative advantage in producing alumini True or False? Explain. Answer. c. (3 marks) Consider the Specific Factors Model and suppose that land is specific to agriculture, capital is specific to manufacturing, and labour is mobile between sectors. The labour market is in equilibrium, i.e., the wage rate is the same in these two sectors. Then, a dec products (keeping the price of agricultural products constant), produces a shift of workers between sectors that leads to a decrease in Marginal Product of Labour (MPL) in the manufacturing sector. True or False? Explain Answer: d. (3 marks) Consumers in a large economy are benefited by a tariff when the tariff improves the country's terms of trade. True or False? Explain. Answer: (3 marks) The two key variables of the gravity model are countries' economic size and the geographical distance between trade partners. Although geographical distance between trade partners is associated with transportation costs, the gravity model is very effective in predicting trade volume of services between countries. True or False? Explain Page 3 of 11 3122 words Focus LO - -I + 50% Type here to search O M W P 12:25 PM 9.C ENG 18/06/2021