1) Consider the following demand and supply curves for good X. P=320-QP=20+2QSuppose the government now opens up to free trade at an international price of $200. How many units of X will be imported/exported at the international price. Calculate change in consumer and producer surplus after free trade is allowed. Suppose now government imposes an import tariff of $10, what would be the new consumer and producer surplus? Does this lead to welfare gains or loss. Draw and Explain your answer.2) US exported .......of goods and services in 2013a) $1.8 billionb) $2.3 trillionc) $2.3 billiond) $2.7 trillion3) US encountered a trade deficit ofa) $ 0.5 billionb) $1.7 trillionc) $0.5 trilliond) $1.7 trillion4) A point outside the production possibility curve is a) Attainable with current resourcesb) Not attainable with current resourcesc) Can attend through traded) B and cThis is the production possibility curve of Venezuela. On Y axis, we have oil and x-axis we have bananas. Answer the following questions.5) What is the maximum amount of oil that Venezuela can produce?a) 450b) 400c) 150d) 1256)The opportunity cost at a) A > Bb) A<B400300BAc) A=Bd) Can’t be determinedConsider two countries – China and USA. USA produces 150 rice cookers and 100 cars with the given resources, while China can produce 150 rice cookers and 80 cars. Answer the following questions7) What is the opportunity cost of producing cars in China?a) 2.375 rice cookersb) 1.875 rice cookersc) 2.515 rice cookersd) 2.925 rice cookers8) What is the opportunity cost of producing rice cookers in USA?a) 0.67 cars b) 0.97 carsc) 0.565 carsd) 0.452 cars9) Which of these is correcta) US should export rice cookers because it has a comparative advantage in producing rice cookers.b) China should export cars because it has a comparative advantage in producing cars.c) US should export cars because it has a comparative advantage in producing rice cookers.d) US should export both because it has a comparative advantage in producing both the goods.10) What is an acceptable terms of trade for the two countries?a) 15 rice cookers for 10 carsb) 15 rice cookers for 8 carsc) 5 rice cookers for 3 carsd) 15 rice cookers for 11
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