International Economics: Midterm Exam
Economics 323-B1
International Economics
Midterm Exam
1100-1150, Friday 26 February 2010
C. Smith
You have 50 minutes to complete this exam. Points allocated to a question are shown in brackets beside the question for a total of 100. Answer ALL questions. Calculators and other electronic devices may NOT be used during the exam.
1. Wages differ greatly across countries and they depend, to some extent at least, on productivity differences. Suppose Canada and Japan produce two types of goods: agricultural goods, such as wheat, and manufactured goods, like cars. In Canada it takes a worker 1 day to produce a ton of wheat, and 2 days to produce a car, while in Japan it takes 3 days to produce a ton of wheat and 1 day to produce a car. Canada has a comparative advantage in the production of wheat, so with free trade Canada will produce and export wheat and Japan will produce and export cars.
(20)
(a) Suppose the free trade price of a ton of wheat is 1 car.
(i)
(ii)
(10)
What is the pre-trade wage in Canada, measured in tons of wheat?
What is the pre-trade wage in Canada, measured in cars?
What is the free trade wage in Canada, measured in tons of wheat?
What is the free trade wage in Canada, measured in cars?
What is the pre-trade wage in Japan, measured in tons of wheat?
What is the pre-trade wage in Japan, measured in cars?
What is the free trade wage in Japan, measured in tons of wheat?
What is the free trade wage in Japan, measured in cars?
(b) Suppose now the free trade price of a ton of wheat is 3 cars.
What is the free trade wage in Canada, measured in tons of wheat?
What is the free trade wage in Canada, measured in cars?
What is the free trade wage in Japan, measured in tons of wheat?
What is the free trade wage in Japan, measured in cars?
(10)
wage.in.Canada when the price of a ton of wheat is 1 car? What is it when wage.in.Japan the price of a ton of wheat is 3 cars? Is it possible that the wage in
International Economics
Midterm Exam
1100-1150, Friday 26 February 2010
C. Smith
You have 50 minutes to complete this exam. Points allocated to a question are shown in brackets beside the question for a total of 100. Answer ALL questions. Calculators and other electronic devices may NOT be used during the exam.
1. Wages differ greatly across countries and they depend, to some extent at least, on productivity differences. Suppose Canada and Japan produce two types of goods: agricultural goods, such as wheat, and manufactured goods, like cars. In Canada it takes a worker 1 day to produce a ton of wheat, and 2 days to produce a car, while in Japan it takes 3 days to produce a ton of wheat and 1 day to produce a car. Canada has a comparative advantage in the production of wheat, so with free trade Canada will produce and export wheat and Japan will produce and export cars.
(20)
(a) Suppose the free trade price of a ton of wheat is 1 car.
(i)
(ii)
(10)
What is the pre-trade wage in Canada, measured in tons of wheat?
What is the pre-trade wage in Canada, measured in cars?
What is the free trade wage in Canada, measured in tons of wheat?
What is the free trade wage in Canada, measured in cars?
What is the pre-trade wage in Japan, measured in tons of wheat?
What is the pre-trade wage in Japan, measured in cars?
What is the free trade wage in Japan, measured in tons of wheat?
What is the free trade wage in Japan, measured in cars?
(b) Suppose now the free trade price of a ton of wheat is 3 cars.
What is the free trade wage in Canada, measured in tons of wheat?
What is the free trade wage in Canada, measured in cars?
What is the free trade wage in Japan, measured in tons of wheat?
What is the free trade wage in Japan, measured in cars?
(10)
wage.in.Canada when the price of a ton of wheat is 1 car? What is it when wage.in.Japan the price of a ton of wheat is 3 cars? Is it possible that the wage in