1.

(a) Greatest to Least Comparative Advantage for Uruguay:

𝑎!" /𝑎!#
Grain 2
Video Tape 3/2
Beef 1
Insulation 1/2
1.(b)

1.(c) Uruguay: Grain Chile: Beef and Insulation

1.(d) 3/2

2.(a)

Home has an absolute advantage at the production of both goods.

Foreign has a comparative advantage at cheese, and home has a comparative
advantage in wine.
2.(b) In the absence of trade, a country’s consumption possibilities are the same as
its production possibilities. Therefore, the consumption possibilities are given
directly by the PPF.
The relative prices will be given by the opportunity cost:

𝑃" 5 𝑃" ∗
= ， ∗=1
𝑃$ 2 𝑃$

2.(c)

2.(d)

&! '(
= ，𝑄" = 0，𝑄" ∗ = 100/3，𝑄$ = 50, 𝑄$ ∗ = 0
&" ')

𝑤 𝑃$ /𝑃" 45
∗
= ∗
=
𝑤 𝑎$ /𝑎" 16
特定要素模型 + 赫俄模型
1.(a) (Figure 1) The Business services sector has relatively more labor employed
because it is a labor intensive industry in comparison to Telecommunications. (1’)

Figure 1 (1’) Figure 2

1.(b) (Figure 2) The price of telecommunications will increase given that Finland will
now face a World demand. (1’) The employment of labor in the telecommunications
sector will increase and employment in the business services sector will decrease. (1’)

1.(c) 𝑃! increases due to the opening up to trade, this provides the first shift of the
curve, (1’) and then 𝑀𝑃𝐾! increases (since there are now more workers per unit
capital), a second shift of the curve, this only means that 𝑅! must increase. (1’)

(1’)

1.(d) Since 𝐿"# decreased, equilibrium 𝑤/𝑃"# = 𝑀𝑃𝐿"# increases. Since 𝐿 !

increased, equilibrium w/P$ = MPL$ decreases. (1’)
The returns have fallen relative to telecommunications and risen relative to business
services. The overall impact on real returns to labor is ambiguous. (1’)

1.(e) It is likely that real returns to labor decrease, although it is still ambiguous.
(1’)
2.(a) The 𝑃𝑃𝐹 looks like 𝑃𝑃𝐹% . (2’)

2.(b) The capital constraint will shift out. (1’) Production will move from point A to
point B. The relative production of cars will increase. (1’)

2.(c) We do not know which way trade flows go unless we know the endowments of a
trading partner. (1’) However, it is likely that Mexico will now become relatively well
endowed with capital. This means that Mexico may export cars to the partners. This
is an example of the Heckscher-Ohlin Theorem because Mexico will export the good
(cars) that uses its relatively more abundant factor (capital) more intensively. (1’)

2.(d) The country will export the good that uses the factor that is relatively more
abundant. If the United States keeps losing capital to Mexico so that it becomes a
labor abundant country, (1’) then it is highly likely that it will export corn and
import GM cars. (1’)

2.(e) If we assume that Mexico has abundant capital relative to its trading partners,
then the Stolper-Samuelson theorem suggests that real wages will fall and the
real return on capital will rise. (1’)
If the endowments of labor and capital is reversed, the result would be the opposite,
real wages would go up and the real return on capital would go down. (1’)
 % %
3.(a) 𝑀𝑃𝐿& = 𝐾%/' 𝐿& )%/' 𝑀𝑃𝐿* = 𝑇%/' 𝐿* )%/' (2’)
' '

√'
3.(b) 𝐿& = 𝐿* = 50 w = (1’)
'

(1’)

√,
3.(c) 𝐿& = 80 𝐿* = 20 (1’) w = '
(1’)

3.(d) 𝒘 = 𝑀𝑃𝐿& × 𝑃& = 𝑀𝑃𝐿* × 𝑃* (1’) （or some other reasonable method）
−𝑀𝑃𝐿* /𝑀𝑃𝐿& = −𝑃& /𝑃* (1’)
3.(e) In the closed economy occur, the ratio of relative prices is equal to 1 at the
initial autarky point as 𝑄& - and 𝑄* - where production and consumption occur and
the economy has a utility level of 𝑈- . Once the economy opens up to trade, the ratio
of relative prices increases to 2 and the production point is different from the
consumption point. (1’) The consumption point is denoted by 𝑄& . and 𝑄* . . The
economy attains a utility level of 𝑈% which is greater than 𝑈- . Therefore, this
country is better off. (1’)

(1’)
4.(a)
𝑃/ = 𝑤 × 𝑎0/ + 𝑟 × 𝑎1/
𝑃2 = 𝑤 × 𝑎02 + 𝑟 × 𝑎12 (1’)
before trade: 𝑃/ = 42 𝑃2 = 15 𝑟 = 4 𝑤 = 1/2 (1’)
after trade: 𝑃/ = 30 𝑃2 = 21 𝑟 = 2 𝑤 = 5/2 (1’)
w/P3 and r/P4 are obvious but 𝐰/𝐏𝐅 𝐚𝐧𝐝 𝐫/𝐏𝐂 need to 𝐛𝐞 𝐜𝐚𝐥𝐜𝐮𝐥ated separately (2’):
Real returns to labor have increased unambiguously: 𝑤/𝑃/ and 𝑤/𝑃2 increases (1’)
Real returns to capital have decreased unambiguously: 𝑟/𝑃/ and 𝑟/𝑃2 decreases (1’)

4.(b)
This result is consistent with the Stolper Samuelson Theorem (1’) because opening
up to trade leads to an increase in the return to China’s abundant factor (labor) (1’)
and a fall in the return to its scarce factor (capital) (1’).

规模经济、不完全竞争与国际贸易
1.(a) The no entry/no exit condition is exactly at the point where there are zero
profits. This happens whenever price equals average cost. At this point there are no
incentives for firms to enter or exit the particular market. (2’)
#
𝑛- = Z72 (1’)

1.(b) Once the trade barriers are imposed the market size halves and the cost curve,
denoted CC, moves up and to the left. Each firm has to reduce production and the
average cost of each firm goes up. (2’)

(2’)
1.(c) 𝑛% = √0.5𝑛-
%
𝑃% = 𝑐 + (3’)
√-.,79!
2.(a) The monopolist would equalize Marginal Revenue to Marginal Cost. (1’) The
intersection of these two curves would determine the optimal quantity to produce,
𝑄& . The corresponding price 𝑃& is determined by the demand curve. (1’)

(1’)

2.(b) A new, more elastic, demand curve is flatter. The new marginal revenue curve
will cross the marginal cost at a point that is to the right of the original optimal
quantity. The new optimal quantity will be greater than the old quantity (1’) and the
associated price will be lower than the original price. (1’)
The profits will be higher for the firm with more elastic demand given that the
demand curve passes through the initial equilibrium point. (1’) since the old
equilibrium price and quantity are still part of the new demand curve, then the new
firm has the option to choose output to achieve this price and quantity pair. However,
this is not the profit-maximizing choice. Therefore, the profit achieved at the old
equilibrium is less than that achieved at the new equilibrium. (1’)

(1’)

2.(c) When a country opens to international trade it allows for foreign produced
products to come into its domestic markets. This makes the demand curves faced by
all domestic firms to become more elastic because there are more possible substitutes
for each domestically produced good. (1’) Domestic firms are now competing against
foreign firms and this makes prices down and an increment in quantity, creating an
increase in consumer surplus. (1’)
consumer：lose A+B+C+D=9350
producer：gain A=3600
importer：gain C=4000