ECON 470

Spring 2015

Name:
Quiz #2

Please submit this Quiz in the DROP BOX in Angel no later than 10:00 a.m., Friday, Feb. 6, 2015.
By submitting this Quiz into the Drop Box, you certify that all work on this Quiz was completed on
your own, without assistance from anyone else.
Use the information in the first table below, which shows input coefficients (i.e., hours of labor required to
produce 1 unit of each good), to fill in the second table with all the correct answers. You may also assume
that each country possesses 2,100 hours of labor.
Smart Phones

Tablet Devices

Denmark

Germany

Maximum 20 points:
1/2 point for each correct answer in (A)
1 point for each correct answer in (B) through (J)

Denmark

Germany

Yes

Yes

(B) What is the opportunity cost of 1 Smart Phone?

0.4 Tablets

0.714 Tablets

(C) What is the opportunity cost of 1 Tablet Device?

2.5 Smart Phones

1.4 Smart Phones

(D) Comparative advantage in Smart Phones? [Yes or No?]

Yes

No

(E) Comparative advantage in Tablet Devices? [Yes or No?]

No

Yes

(F) Suppose, in autarky, Denmark decides to produce and consume

600 Smart Phones. If so, what is the maximum amount of
Tablet Devices that Denmark will be able to produce and
consume in autarky?

180

(A) Absolute advantage? [Yes or No? And in which good(s)]

(G) Suppose, in autarky, Germany decides to produce and consume

315 Smart Phones. If so, what is the maximum amount of
Tablet Devices that Germany will be able to produce and
consume in autarky?
(H) If the countries specialize according to their comparative
advantage, how much of each good will each country produce?

(I) If the two countries trade with each other, what are the limits within
which the terms of trade will fall?
(J) Suppose, in equilibrium, the terms of trade settle at:
2 Smart Phones = 1 Tablet Device.
If, after specializing, the two countries trade 400 Smart Phones
for 200 Tablet Devices with each other, what are the
consumption gains from trade for each country (compared to their
autarky situations described in (F) and (G).

75

Smart
Phones

Tablet
Devices

Smart
Phones

Tablet
Devices

1050

300

(1.4SP/1Tab)<(P_x/P_y)<(2.5
SP/1Tab)
Consumption
Gains:

Consumption
Gains:

Smart
Phones

Tablet
Devices

Smart
Phones

Tablet
Devices

50

20

85

25