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ECO121 - Test 01 - Individual Assignment 01

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Le Dieu Hang (K16HL)
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120 views5 pages

ECO121 - Test 01 - Individual Assignment 01

Individual

Uploaded by

Le Dieu Hang (K16HL)
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Student Information

Name: LÊ DIỆU HẰNG Roll number: HS163060


Room No: Class: MKT1614

FOR TEACHER ONLY


MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

ECO121_Test 01_Individual Assignment 01

Question1. (2 points)

1. a. What is defined as absolute advantage?

-Absolute advantage is the


ability to produce a good using
fewer inputs than another
producer
-Absolute advantage is the
ability to produce a good using
fewer inputs than another
producer
Absolute advantage is the
ability to produce a good using
fewer inputs than another
producer
- Absolute advantage is the ability to produce a good using fewer inputs than another
producer
b. What is defined as comparative advantage?
- Comparative advantage is the ability to produce a good at a lower opportunities cost
than another producer
c. Case 1: Output approach
Two commodities and two countries
Given the resources, Singapore and Malaysia can produce the following products –
television sets and cars (see Table 01)
Countries TV sets Cars (units)
Singapore 100 50
Malaysia 60 40
Table 01
+ Which country has the absolute advantage in the production of both TV sets and
Cars over the other?
- Singapore has the absolute advantage in the production of both tv sets and cars
over Malaysia
+ Which country has the comparative advantage either in the production of TV sets or
in the production of Cars over the other?
- The opportunity cost of 1 tv set in Singapore is 0.5 car . Instead of producing 1 TV
set , they can produce car

d. Case 2: Input approach


Two commodities and two countries
Give the resources, America and England can produce one unit for both Steel and Coal
in terms of number of working hours shown as follows:
Countries One unit of Steel One unit of Coal
required required
America 80 man-hours 90 man-hours
England 120 man-hours 100 man-hours
Table 02
+ Which country should specialize in the production of Steel?
-America has the comparative advantage in production of Steel than England
-Therefore, America should specialize in the production of Steel than England
+ Which country should specialize in the production of Coal?
-

e. Case 3: Input approach


Two countries but multiple commodities
The following Table 03 shows the numbers of man – days taken to produce an
equivalent amount of six commodities in each of the two countries – Switzerland and
Sweden.
Countries Coal Cotton Wool Iron Wheat Maize
Switzerland 120 60 70 100 140 80
Sweden 100 25 35 90 90 20
Table 03
+ Assuming that there are no other costs of production. Which two commodities is
Sweden most likely to import from Switzerland?
- Its coal and wheat

Question 2 (3 points):
Suppose there is an economy that produces only two goods: tequila and peyote. In 2008, the
economy produced 100 litres of tequila and 200 peyote plants. The unit prices (per litre or per
plant) in 2008 were $100 and $500. 1000 people were employed in the tequila sector, and the
peyote sector employed 500.

In 2009, the weather was particular sunny and hot, which is good for tequila production but
bad for the cultivation of peyote. As a result, the economy produced 120 litres of tequila but
only 191 peyote plants in 2009.

The tequila and peyote sold for $90 per litre and $550 per plant that year. 1100 people were
employed in the tequila sector, while only 450 people worked in the peyote sector.

Answer the following questions:

a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?
Answer:
GDP(2008)= 100*100 + 200*500 = $110000
GDP(2009)= 120*90 + 191*250 = $115850
%GDP= (115850-110000)/110000 = 5.32%

b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base year?
What is the percentage change?
Answer:
GDP(2008)= 100*100 + 200*500= $110000
GDP(2009)= 120*100 + 191*500= $107500
%GDP= (107500 – 110000)/110000= -2.27%

c. How much is the GDP deflator in the two years? By what percentage does the
price level change from the base year to 2009?
Answer:
- The GDP de ator is the ratio of nominal GDP to real GDP. In the base year,
nominal GDPequals real GDP, so the GDP de ator is 1. In 2009 it is approximately 1.08, so
the price level rose byabout 8%

d. What was the growth rate of average labour productivity for the whole economy
between 2008 and 2009?
Answer:
- The average labour productivity in 2008: 110000/(1000+500)= $73.333 per
worker
- The average labour productivity in 2009: 107500/(1100+450)= $69.35 per
worker
=> Growth rates: (69.35 – 73.333)/73.333= -5.43%

Question 3 (2 points)
In the country of Kwaki, people produce canoes, fish for salmon, and grow corn. In one year
they produced 5000 canoes using labor and natural materials only, but sold only 4000, as the
economy entered a recession. The cost of producing each canoe was $1000, but the ones that
sold were priced at $1250. They fished $30 million worth of salmon. They used $3 million of
the salmon as fertilizer for corn. They grew and ate $55 million of corn. What was Kwaki's
GDP for the year?

Answer:
Inventories are valued at the cost of production:
-The 1000 canoes in inventory were valued at $1000 each for a total of $1000000.
-The 4000 canoes at $1250 each totaled $5000000.
-Salmon as a final good was worth $27000000 and corn worth $55000000 was grown.
-> GDP= $88000000

Question 4. (3 points)
+ What are the benefits/gains from international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade relations

+ What are the disadvantages of international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade relations

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