-to-date with security updates, fixes, and improveme 2 4 S AGEC 3300 Midterm Exam N1 Part Two: Problems and Discussion Questions Question 1. The PPF for Canada is shown in Figure I which describes the best possible combinations of food and machine Canada can produce given its resources and technology. a) (5 pts.) Suppose that prior to trade, production and consumption are at point A. What does the slope of line Pa represent? Find the opportunity cost of producing machine in Canada. b) (6 pts.) After trade opens up Canada faces a world price shown by the line Pr. At this world price find and label the production point for Canada. Will Canada export or import machine at this price? Why? c) (6 pts.) Given the indifference curves for Canada, labeled I, please draw the new indifference curves after trade, and mark and label the point of consumption after trade. Draw the trade triangle that shows Canada exports and imports. Label exports and imports. Figure 1 Food Canada Canada Machine words English (United States) Normal No Spacing Heading 1 Heading 2 Title Subtitle Style Pane Question 2. Suppose that Mexico and Canada each produces only two goods, Cheese (C) and automobiles (A). The following represents the maximum amounts of the goods that the countries can produce given their available factors of production and technology: Mexico Canada 200 a) (5 pts.Draw the production possibilities frontier of Mexico and Canada with automobiles on the y-axis and cheese on the x-axis. 80 170 100 b) (4 pts. Which country has absolute advantage in producing cheese? Automobiles? Why? c) (2 pts. Which country will export cheese? Automobiles? Question 3.(9 points) Assume there are two goods: beef (labor intensive) and cars (capital intensive), there are two countries: Japan (capital abundant) and the LLS (abor abundant), and two inputs: labor and capital. Japan and the U.S. have the same technology, tastes and income. What is the trade pattern between Japan and the U.S. based on the above information and H-O model? Please state and then graphically demonstrate the H-O theorem. I Focus -to-date with security updates, fixes, and improveme 2 4 S AGEC 3300 Midterm Exam N1 Part Two: Problems and Discussion Questions Question 1. The PPF for Canada is shown in Figure I which describes the best possible combinations of food and machine Canada can produce given its resources and technology. a) (5 pts.) Suppose that prior to trade, production and consumption are at point A. What does the slope of line Pa represent? Find the opportunity cost of producing machine in Canada. b) (6 pts.) After trade opens up Canada faces a world price shown by the line Pr. At this world price find and label the production point for Canada. Will Canada export or import machine at this price? Why? c) (6 pts.) Given the indifference curves for Canada, labeled I, please draw the new indifference curves after trade, and mark and label the point of consumption after trade. Draw the trade triangle that shows Canada exports and imports. Label exports and imports. Figure 1 Food Canada Canada Machine words English (United States) Normal No Spacing Heading 1 Heading 2 Title Subtitle Style Pane Question 2. Suppose that Mexico and Canada each produces only two goods, Cheese (C) and automobiles (A). The following represents the maximum amounts of the goods that the countries can produce given their available factors of production and technology: Mexico Canada 200 a) (5 pts.Draw the production possibilities frontier of Mexico and Canada with automobiles on the y-axis and cheese on the x-axis. 80 170 100 b) (4 pts. Which country has absolute advantage in producing cheese? Automobiles? Why? c) (2 pts. Which country will export cheese? Automobiles? Question 3.(9 points) Assume there are two goods: beef (labor intensive) and cars (capital intensive), there are two countries: Japan (capital abundant) and the LLS (abor abundant), and two inputs: labor and capital. Japan and the U.S. have the same technology, tastes and income. What is the trade pattern between Japan and the U.S. based on the above information and H-O model? Please state and then graphically demonstrate the H-O theorem. I Focus
