40 Questions: One point for each correct answer and 5 BONUS POINTS I A legital s
ID: 1104418 • Letter: 4
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40 Questions: One point for each correct answer and 5 BONUS POINTS I A legital starting point from which the study of international trade begins is the principle of comparative advantage. The nation of Waterland forbids intcrnational trade. In Waterland, you can obtain 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. d. All of the above are correct. aterland has a comparative advantage, relative to other countries, in producing bicycles. c. if Waterland were to allow trade, it would export computers. squal the world price of beans, then which of the following is NOT consistent with the impact of a free trade? 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. d at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country 2. Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans decreases to Figure#1: On the Price diagram below, Orepresents the quantity of computers and P represents the price of computers. Domestic Supply World _ Price Domestic Demand 3. Refer to Figur Quantity e#1. If the country does not engage in trade with the b. A +B. c. A+B+D rest of the world, what is its producer surplus? d. C 4 Refer to Figure#1. At the worldprice asdrawn, producer surplus in b. A+B+C. c.C+B+D. d. A+B+ D. 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.Explanation / Answer
1) The answer is A -) Waterland has an absolute advantage , relative to other countries in producing computers.
because, In Waterland you can get a computer by trading 2 bicycles and in other countries you can get a computer by trading 3 bicycles. so, the production cost of computer in Waterland is relatively low in any other countries. thats why in Waterland the cost of computer is also. and thus it has a absolute advantage in producing computers.
2) The answer is A -) That country becomes an imported of beans.
because, when the world price of beans is equal to domestic price of beans, then there is no need to import beans from other countries. therefore, country becomes an imported of beans becomes not consistent.
3) The answer is D-) C.
because, producer surplus is the area of the triangle below the equilbruim price to the quantity demanded.
4) The answer is C -) C + B + D
5) The answer is D-) D, and this area represents a gain of total surplus because of trade.
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