The key to Problem Set 1 1

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Part I: 5 Edition, Chapter 2 (labor Productivity and Comparative Advantage: The Richardian Model),
Problems 1, 2, 3.
1. a. 生产可能性边界曲线是一条直线, 在400 (1200/3)处与苹果轴相截, 在600 (1200/2)处与香蕉轴相截.
b. 苹果相对于香蕉的机会成本是3/2.生产1单位苹果需要3单位的劳动,生产1单位香蕉需要2单位的劳动. 如果放弃1单位苹果的生产,这将释放出3单位的劳动,这3单位的劳动可以被用来生产1.5单位的香蕉.
c. 劳动的流动性可以使得各个部门的工资趋同,竞争可以使得商品的价格等于它们的生产成本.这样,相对价格等于相对成本,而相对成本等于工资乘以苹果的单位产品劳动投入,再除以工资乘上香蕉的单位产品劳动投入.因为各个部门工资相等,所以价格比率等于单位产品劳动投入的比率,即生产苹果所需的3单位劳动与生产香蕉所需的2单位劳动相比.
2 略.
3. a. 相对需求曲线包括(1/5,5),(1/2,2),(1,1),(2,1/2)几个点.
b. 苹果相对价格的均衡点是相对需求曲线和相对供给曲线的相交点. 就是点(1/2,2),即相对需求曲线与相对供给曲线的垂直部分的相交点.那么均衡的相对价格为2.
c. 本国只生产苹果,外国只生产香蕉,每个国家以本国生产的产品换得另外一国生产的产品.
d. 在没有贸易的情况下,本国可以通过减少2单位苹果的生产获得3单位的香蕉,外国可以通过减少5单位香蕉的生产获得1单位的苹果.贸易使得各国都能够以2单位香蕉换1单位苹果.那么本国可以通过减少2单位苹果的生产获得4单位的香蕉.外国可以通过减少2单位香蕉的生产获得1单位的苹果,这样每个国家都可以通过贸易获益.
Part 2:
1. The Gains from Trade associated with the principle of Comparative Advantage depends on
(a) The trade partners must differ in technology or tastes.
(b) There can be no more goods traded than the number of trade partners.
(c) There may be no more trade partners than goods traded.
(d) All of the above
(e) None of the above
Answer: A
2. Mahatma Ghandi exhorted his followers in India to promote economic welfare by decreasing imports. This approach
(a) Makes no sense
(b) Makes no economic sense
(c) Is consistent with the the Ricardian model of comparative advantage.
(d) Is not consistent with the Ricardian model of comparative advantage.
(e) None of the above
Answer: D
3. In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion in the context of the Ricardian model of comparative advantage.
Answer: Regardless of relative wage levels, the United States would be able to provide its populace with a higher standard of living than would be possible without trade. Also, low wages tend to be associated with low productivities.
4. It is generally claimed that a movement from autarky to free trade consistent with Ricardian comparative advantage increases the economic welfare of each of the trade partners. However, it may be demonstrated that under certain circumstances, not everyone in each country is made better off. Illustrate such a case.
Answers: (a) If inter-generational, or economic growth considerations are taken into account, then a country may end up specializing in a good that has no or few growth linkages with the rest of the economy (e.g. an “enclave” sector).
(b) If some of the residents of a country have tastes biased toward their exportable, then they may suffer due to the trade-affected increase in the market price of the exportable good.
5. Given the following information:
One Labor-Hour of Production:
U.S. Croatia
Soy 300 20
Toys 100 20
(a) What is the marginal cost of a toy in each country?
Answer: 3 units of Soy in the U.S., and 1 Soy unit in Croatia.
(b) How might you demonstrate (quantitatively) that a country with absolute productivity advantage in a product may find that its production is more costly than in the other (unproductive) country? Answer: The U.S. have absolute productivity advantage in toys. Nevertheless, toys are three times more costly than they are in Croatia.
(c) Demonstrate the fact that trade produces imports (indirectly) cheaper, even in the relatively unproductive country.
Answer: In Croatia, one unit of wheat will cost one toy. However, if the terms of trade fall between the two autarkic price ratios (a condition necessary for both countries to enjoy gains from trade), say at 2 Soy units per toy, then Croatia will gain each Soy unit with less of
a sacrifice of toy production.。