Econ 355 (002) NAME:____________

Winter Session, Term 2, February 2023

M. Vaney STUDENT NUMBER:____________
Quiz #1
Answer all questions. Show all your work involved in getting to your …nal answer.

1. Consider a Ricardian world with 2 countries (Home and Foreign) and 2 goods, Solar Panels
(S ) and Televisions (T ). Home has a labour force, L = 800; Foreign has a labour force,
L = 500. For Home: M PLS = 6 and M PLT = 4: In foreign, M PLS = 4 and M PLT = 2:

(a) Graph the PPF for the Home country with S on the horizontal axis and T on the vertical
axis. Determine values associated with both intercepts and the slope. (4 marks)

S demand 5 PS
(b) The World relative demand for Solar Panels function is RDworld : T
=1 8 PT
.
PS trade
Determine the free-trade relative price of Solar Panels, PT
. (6 marks)

1
2. The following table provides information concerning the production of Bicycles (B ), Gui-
tars (G), Monitors (M ) and Umbrellas (U ) in two countries (Home and Foreign) using
Labour (L). Consumers in both countries like to consume all 4 goods.

Good Home Foreign

(aLi ) (aLi )
B 10 6
G 6 5
M 12 5
U 4 3

(a) Determine the autarky price of a Monitor relative to a Guitar in the foreign country. (4
marks)

(b) If the free-trade equilibrium relative wage is ww = 10

7
and there are transport costs z =
15% that apply to goods moving between Home and Foreign (in either direction) de-
termine the patterns of production, exports and imports in each country. (6 marks)