Basic Econ Study Prep

STUDY GUIDE FOR ECN 360 MIDTERM EXAM – FALL 2004

CHAPTER 2

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Calculate the relative price, or opportunity cost, of S, i.e., how much T has to be given up to get 1 unit of S?

Calculate the relative price, or opportunity cost, of T, i.e., how much S has to be given up to get 1 unit of T?

If the relative price of S were to increase, how would the price line change? That is, if more T has to be given up to get one unit of S, how would the line change?

If the relative price of T were to increase, how would the price line change?

Answer the next questions based on the following diagram

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In autarky, the economy would be in general equilibrium at point

(a) I.

(b) D.

(c) E.

(d) F.

If tastes were to change so that S became more preferred relative to T, then, in autarky, production and consumption would move from their initial equilibrium to a point such as

(a) C.

(b) D.

(c) E.

(d) F.

Answer questions 5 through 7 based on the information in the following table

Country

Goods A B

|X |3 9 |

|Y |4 2 |

(numbers indicate hours of labor per unit of output)

5. Country A has absolute advantage in

(a) Good X.

(b) Good Y.

(c) Neither X nor Y.

(d) Both X and Y.

6. Country B has absolute advantage in

(a) Good X.

(b) Good Y.

(c) Neither X nor Y.

(d) Both X and Y.

7. If countries were to trade along the lines of absolute advantage

(a) A would export X to B.

(b) B would import Y from A.

(c) neither country would want to trade.

(d) More information is needed to determine the pattern.

Answer questions 10-11 based on the information in the following table

Country

Goods A B...