Economics 3352B, International Trade
Midterm Exam 2
国际贸易期中代考 Instructions 1.Your answers to this exam are due by 7:00pm, Eastern Time, on March 4, 2022. Upload a legible pdf (from a photo or scan)
Instructions 国际贸易期中代考
- Your answers to this exam are due by 7:00pm, Eastern Time, on March 4, 2022. Upload a legible pdf (from a photo or scan) of your answers to owl. If your exam is received between 7:01-7:15pm, it will be penalized by 10 points. If it is received after 7:15pm, it will not be accepted.
- You must complete this exam by yourself, without consulting anyone during the exam time window (4pm-7pm Eastern Time).
- Show all of your work and label all of your graphs.
- Read the questions carefully and answer only what is being asked.
Question 0 – Honour pledge [2 points]
At the beginning of your exam answers, please write out the following statement, then print and sign your name.
“I affirm that I have neither given nor received any help on this exam, and that this work is my own. I have not spoken to anyone else about this exam between 4pm and 7pm Eastern Time on March 4.”
Question 1 – Prices and factor allocation in an H-O model [50 points] 国际贸易期中代考
Consider an economy with two countries (A and B), two goods (machines, M, and textiles, T), and two factors of production (capital, K, and labor, L). The production functions in each country are
(a) [10 pts] Solve for the optimal capital/labor ratios in the production of each good. Under what conditions is textiles labor intensive? Under what conditions is it capital intensive?
For the rest of this question, suppose that textiles are labor intensive.
(b) [10 pts] Write expressions for the unit value isoquants and unit isocost for each industry.
(c) [10 pts] Draw a figure illustrating the effect of a decrease in the price of textiles (pT) on the real income of workers and and capital owners in each country. Be sure to fully label your figure, and explain in words what the figure is illustrating.
(d) [10 pts] What can you learn from your figure about how opening to trade affects workers and capital owners in each country? Explain your answers.
(e) [10 pts] Draw a figure illustrating the effect of a decrease in the price of textiles (pT) on the output of each industry. Be sure to fully label your figure, and explain in words what the fifigure is illustrating.
Question 2 – Equilibrium in an H-O model [48 points] 国际贸易期中代考
Consider an economy with two countries (A and B), two goods (X and Y) and two factors of production (K and L). The production functions in each country are
qX = min {KX, LX}
qY = (KY)1/2 (LY)1/2
U (cX, cY) = logcX + logcY
where cX, cY are consumption of goods X and Y, and log denotes natural logarithm.
Compute the free trade equilibrium, being sure to calculate all quantities and prices for each country. Then calculate each country’s exports and imports of each good, and explain how the pattern of trade relates to the economy’s productiontechnologies and factor endowments.
