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Tutorial 1 Questions EC306 PDF

This document provides a tutorial on international economics concepts including demand and supply, consumer and producer surplus, free trade, and two-country trade models. It contains multiple choice and short answer questions to test understanding of key topics. Specifically, it examines how opening trade between two countries affects prices and quantities traded when the pre-trade prices differed between the countries. Students are asked to use supply and demand diagrams to illustrate the impact of free trade on overall economic welfare in the countries.

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129 views

Tutorial 1 Questions EC306 PDF

This document provides a tutorial on international economics concepts including demand and supply, consumer and producer surplus, free trade, and two-country trade models. It contains multiple choice and short answer questions to test understanding of key topics. Specifically, it examines how opening trade between two countries affects prices and quantities traded when the pre-trade prices differed between the countries. Students are asked to use supply and demand diagrams to illustrate the impact of free trade on overall economic welfare in the countries.

Uploaded by

Roite Betero
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Tutorial 1: International Economics

Topic: Theory of Demand and Supply


Focus: Understand the Demand and Supply and using this concept you need to be able to
solve the equations. Also using graphs you should be able to explain the effect of pre-trade
and post trade scenarios of two countries.
1. If an individual consumes more of good X when his/her income doubles, we can infer that
a. the individual is highly sensitive to changes in the price of good X.
b. good X is a normal good.
c. good X is an inferior good.
d. the demand for good X is perfectly inelastic.

2. Suppose good X is a substitute of good Y. Everything else remaining unchanged, an increase


in price of good Y will lead to:
a. an increase in demand for good Y.
b. a decrease in demand for good X.
c. an increase in demand for good X.
d. a decrease in price of good X.

3. Refer to Figure 2.1 below. At a price of $70, the consumer surplus equals:

Price ($/unit)

150
Supply
120

70

40
Demand
10 Quantity
0 100 200 300 (thousands)

a. $6,000,000.
b. $8,000,000.
c. $5,000,000.
d. $10,000,000.
4. Refer to Figure 2.1 below. At a price of $70, the producer surplus equals:

Price ($/unit)

150
Supply
120

70

40
Demand
10 Quantity
0 100 200 300 (thousands)

a. $6,000,000.
b. $8,000,000.
c. $15,000,000.
d. $30,000,000.

Topic: Demand and Supply


5. Which of the following groups is most likely to be benefitted when a country engages in free
trade?
a. All the domestic producers of the country
b. The manufacturers of exportable goods
c. The producers in the import-competing industries
d. The workers employed in the import-competing industries

6. Suppose the domestic supply (QS) and demand (QD) for skateboards in the United States are
given by the following set of equations:
QS = –60 + 3P
QD = 390 – 2P
In the absence of international trade in skateboards, what will be the equilibrium price of
skateboards in the United States?
a. $66
b. $90
c. $45
d. $150
Topic: Two National Markets and the Opening of Trade
7. Suppose the domestic supply (QS) and demand (QD) for skateboards in the United States are
given by the following set of equations:
QS = –60 + 3P
QD = 390 – 2P
In the absence of international trade in skateboards how many skateboards will be sold in the
United States?
a. 138
b. 258
c. 210
d. 930

8. Suppose the domestic supply (QS) and demand (QD) for skateboards in the United States are
given by the following set of equations:
QS = –60 + 3P
QD = 390 – 2P

Calculate the change in producer surplus when the United States engages in free trade and
imports skateboards from the rest of the world at a per unit price of $75.
a. +$2,812.50.
b. -$2,812.50.
c. +$3,375.
d. -$3,375.

Topic: Two National Markets and the Opening of Trade


Short Answer Questions
Assume that there are only two countries in the world, Pacifica and Atlantica. Both countries
produce and consume surfboards. The pre-trade price of surfboards in Atlantica is lower than the
pre-trade price of surfboards in Pacifica. Draw a three-graph diagram to depict the Pacifica,
Atlantica, and international markets for surfboards illustrating the pre-trade price difference.
Now assume that free trade opens up between Pacifica and Atlantica. Depict a plausible world
price in the graphs. What happens to overall economic welfare in the two countries? Be sure to
label and refer to the graphs in your answer.
From textbook 16th Edition: Thomas A Pugel
Question 7: Explain what is wrong with the following statement” “Trade is self-eliminating.
Opening up trade opportunities drives prices and costs into equality between countries. But once
prices and costs are equalized, there is no longer any reason to trade the product from one
country to another, and trade stops.”

Question 13: The equation for the demand curve for writing paper in Belgium. Questions a-c.

The end

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