ECON 260 South Carolina State University School of Business Department of Accoun
ID: 1104386 • Letter: E
Question
ECON 260 South Carolina State University School of Business Department of Accounting, Agribusiness, and Economics Econ 260-01 Test #3A November 6, 2017 Nam 40 Qustions: Oue point for each correet answer and 5 BONUS POINTS . A logical starting point from which the study of international trade begins is the principle of comparative advantnge. The nation of Waterland forbids international trade. In Waterland, you can oblain a computer by trading 2 bicycles. In other countries, you can obtain a computer by trading 3 bicycles. These facts indicate that a. Waterland has an absolute advantage, relative to other countries, in producing computers b. Waterland has c. if Waterland were to allow trade, it would export computers a comparative advantage, relative to other countries, in producing bicycles d. All of the above are correct 2. Suppose a country abandons a no-trade policy in favor of a free-trade policy. If,as a resul, the domestic price of beans decreases to price of beans, then which of the following is NOT consistent with the impact of a free trade? a. that country becomes an importer of beans. b. that country has no comparative advantage in producing beans c. at the world price, the quantity of beans supplied in that country less than the quantity of beans demanded in that country F igure#1 : On the diagram below, represents the quantity ofcomputers and P represents the price of rs. Price stic upply World Price 3. Refer to Figure#1. If the country does not engage in trade with the rest of the world, what is its producer surplus? b.A+B. c. A+B+D 4. Refer to Figure#1. At the world price as drawn, producer surplus in this computer market after trade is a. C b. A+B+C c.C+B+D d. A+B+ ID 5. Refer to Figure#1. The change in total surplus in this market because of trade is a. A, and this area represents a gain in total surplus because of trade. b. B, and this area represents a gain of total surplus because of trade. c. C, and this area represents a gain in total surplus because of trade d. D, and this area represents a gain of total surplus because of trade. RMUNNICHAExplanation / Answer
1.a. waterland has an absolute advantage relative to other countries in producing computers.
2.a. that the country becomes the importer of beans.
3.d. C
4.c. C+B+D
5.d. D, and this area represents a gain of total surplus because of trade.
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