I. Multiple Choice Section (2pts each) 1.

Countries trade with each other because they are _______ and because of ______. A. different, costs B. similar, scale economies C. different, scale economies D. similar, costs E. None of the above 2. The reason trade clearly benefits a country is that A. it raises the real income of the more productive elements in society. B. it lowers the real income of the less productive elements in society. C. it increases the levels of consumption of everyone. D. it increases society's consumption choices. E. None of the above 3. Given the following information: Number of Units Produced by one Unit of Labor Cloth Hats Home 10 20 Foreign 60 30 A. Neither country has a comparative advantage. B. Home has a comparative advantage in cloth. C. Foreign has a comparative advantage in cloth. D. Foreign has a comparative advantage in hats. E. Home has a comparative advantage in both products

4. A country engaging in trade according to the principles of comparative advantage gains from trade because it A. is producing exports indirectly more efficiently than it could alternatively. B. is producing imports indirectly more efficiently than it could domestically. C. is producing exports using fewer labor units. D. is producing imports indirectly using fewer labor units. E. None of the above 5. The Ricardian theory of comparative advantage states that a country has a comparative advantage in hats if A. output per worker of widgets is higher in that country. B. that country's exchange rate is low. C. wage rates in that country are high. D. the output per worker of hats as compared to the output of some other product is higher in that country. E. Both B and C
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6. Trade between two countries can benefit both countries if A. each country exports that good in which it has a comparative advantage. B. each country enjoys superior terms of trade. C. each country has a more elastic demand for the imported goods. D. each country has a more elastic supply for the supplied goods. E. Both C and D 7. If a very small country trades with a large country according to the Ricardian model, then A. the small country will suffer a decrease in economic welfare. B. the large country will suffer a decrease in economic welfare. C. the small country will enjoy gains from trade. D. the large country will enjoy gains from trade. E. None of the above MIST BRIC PIIGS 8. A nation engaging in trade according to the Ricardian model will find its consumption bundle A. inside its production possibilities frontier. B. on its production possibilities frontier. C. outside its production possibilities frontier. D. inside its trade-partner's production possibilities frontier. E. on its trade-partner's production possibilities frontier 9. Given the following information: Unit Labor Requirements Cloth Home 10 Foreign 60 A. Neither country has a comparative advantage. B. Home has a comparative advantage in cloth. C. Foreign has a comparative advantage in cloth. D. Home has a comparative advantage in hats. E. Home has a comparative advantage in both products

Hats 20 30

10. The earliest statement of the principle of comparative advantage is associated with __________________________________________ (name of the economist) 11. According to Ricardo, a country will have a comparative advantage in the product in which its A. labor productivity is relatively low. B. labor productivity is relatively high. C. labor mobility is relatively low.
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D. labor mobility is relatively high. E. None of the above

II. Problems (66pts in total) 1. Mxico tiene 200 unidades de trabajo. Puede producir dos bienes, automviles y maz. El requerimento de unidades de trabajo en la produccin de automviles es 20, mientras que en la de maz es 40. a. Represente grficamente la frontera de posibilidades de produccin de Mxico. (Para obtener el mximo de puntos es necesario elaborar una tabla) b. Cul es el costo de oportunidad de los automviles en trminos de maz? y del maz en trminos de los automviles? (Explique para obtener puntos completos). 2. Por otro lado, Brasil tiene una fuerza de trabajo de 360 unidades. El requerimento de unidades de trabajo en Brasil es de 18 mientras que en la de miz es 4. c. Represente grficamente la frontera de posibilidades de produccin de Brasil. (Para obtener el mximo de puntos es necesario elaborar una tabla) d. Cul es el costo de oportunidad de los automviles en trminos de maz para Brasil? y del maz en trminos de los automviles? (Explique para obtener puntos completos). 3. Determine qu pas tiene ventaja comparativa y en cul de los bienes se presenta, es decir, qu va a importar Mxico y qu va a exportar Brasil y viceversa.