ECON306 Week 1 & 2 Study Problems

Week 1 & 2 Study Problems Suggested completion date: Sat. 8/31

Terms to Know

Autarky price
Producer Surplus
Consumer Surplus
International
Price
World Price
Import Demand
Export Supply
Net National Gains
from Trade

Basic Supply & Demand Model
Producer surplus is:found on a graph as the area under the
equilibrium price and above the supply curve.The net gain in economic well-being associated
with producing and selling a quantity of a good.Used to measure the impact of a price change on producers’
economic well-being.All of the above.
ANSWER:
Figure 2.1 CAUTION: For consumer and producer surplus
calculations, you may need to redraw the graph to scale.
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Referring to figure 2.1, at a price of
$70, the amount of consumer surplus is:$6,000$8,000$15,000$30,000
Referring to figure 2.1, at a price of
$70, the amount of producer surplus is:$6,000$8,000$15,000$30,000

Referring to figure 2.1, at a price of
$120, the amount of consumer surplus is ____ and the amount of producer
surplus is _____. (Assume that
consumers and producers are able to transact at their desired quantities.)$9,500; $1,500$1,500; $1,500$1,500; $16,500$1,500; $9,500
The opening up of free trade brings
gains to:All producers.Producers in export industries.Producers in import-competing
industries.Workers in import-competing
industries.
An increase in the imports of clothing
into the United States will benefit _____ and hurt ____.U.S clothing producers; foreign
clothing producersforeign clothing producers; foreign
clothing consumersU.S clothing consumers; foreign
clothing producersU.S clothing consumers; U.S. clothing
producers
Which of the following says that any
dollar of gain or loss will be equally valued, regardless of who
experiences it?Consumer surplusProducer surplusArbitrageOne-dollar, one-vote metric
Consider a typical two-country model.
In the exporting country, consumers will be ____ and producers will be
_____ with the opening of international trade.Happy; happyUnhappy; happyUnhappy; unhappyHappy; unhappy

Use the following
information to answer questions 9 thru 16:
Suppose the domestic supply
and demand curves 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 the domestic
price in the United States be for skateboards?
$66$90$45$150
In the
absence of international trade in skateboards how many skateboards will be
sold in the United States?138258210930
If the
United States could trade skateboards freely with the rest of the world at
a price of $75, how many skateboards would be produced in the United
States?165240285It depends
on foreign demand skateboards.
If the United States could trade
skateboards freely with the rest of the world at a price of $75, how many
skateboards will be purchased in the United States?165240285It depends
on foreign supplies of skateboards.
If the
United States could trade skateboards freely with the rest of the world at
a price of $75, the United States would import ____ skateboards and export
______ skateboards.240; 1650; 16575; 0240; 0
In the
absence of trade with the rest of the world, the amount of consumer
surplus in the United States skateboard market is _____ and the amount of
producer surplus in the United States skateboard market is______.$7,350;
$11,025$11,025;
$9,450$20,474;
$7,350$11,025,
$7,350
The opening
of free trade with an international price for skateboards of $75 will lead
to a change in consumer surplus of ____.+$2,812.50-$2,812.50+$3,375-$3,375
The opening
of free trade with an international price for skateboards of $75 will lead
to a change in producer surplus of ____.+$2,812.50-$2,812.50+$3,375-$3,375
Use the following
information to answer questions 17 thru 23:
Suppose the domestic supply
and demand curves for MP3 players in the United States are given by the
following set of equations:
QS = -50 + 10P
QD = 925 – 5P
In the
absence of international trade in MP3 players, what will the domestic
price in the United States be for MP3 players?$65$63.33$90$180
In the
absence of international trade in MP3 players, how many MP3 players will
be sold in the United States?1825600608925
If the
United States could trade MP3 players freely with the rest of the world at
a price of $90, how many MP3 players would be produced in the United
States?625475850It depends
on foreign demand MP3 players.
If the United States could trade MP3
players freely with the rest of the world at a price of $90, how many MP3
players will be purchased in the United States?625475925It depends
on foreign supplies of MP3 players.
If the
United States could trade MP3 players freely with the rest of the world at
a price of $90 the United States would import ____ MP3 players and export
______ MP3 players.0; 375375; 0475; 9250; 925
In the
absence of trade with the rest of the world, the amount of consumer
surplus in the United States MP3 player market is _____ and the amount of
producer surplus in the United States MP3 player market is______.$30,000.50;
$22,000.50$22,000.00;
$30,000.00$10,000.50;
$39,000.50$36,000.00;
$18,000.00
The opening
of free trade with an international price for MP3 players of $90 will lead
to a ____ to the United States in the amount of ____.Gain;
$16,250.00Gain:
$4,687.50Loss; $3,125.00Loss;
$13,500.50
Use the following
information to answer questions 24 thru 23:
Suppose the domestic supply
and demand curves for android phones the United States are given by the
following set of equations:
QS = 30 + 2P
QD = 60 – P
In the
absence of international trade in android phones, what will the domestic
price in the United States for android phones?$60$3.33$10$18
In the
absence of international trade in MP3 players, how many MP3 players will
be sold in the United States?18506890
Use the figure below to answer questions 26-29
El Salvador’s
Home Coffee Market El
Salvador’s Import Demand and Export Supply
Price in $ Price in $
.gif”>.gif”>.gif”>.gif”> 16 S 16
.gif”>.gif”>.gif”>.gif”>.gif”>.gif”> 14 14 Export Supply
12 12
.gif”>.gif”>.gif”> 10 10
8 8
.gif”>.gif”>
6 6
4 4
2 D 2 Import
Demand

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2 4
6 8 10 2 4
6 8 10
The
equilibrium price of coffee in El Salvador is:$16$8$10$12$14.
If the price of El Salvadoran coffee in
the international market is $10, El Salvador will export _____ pound(s) of
coffee.twozerosixeightten
If the price
of coffee in the international market is $14:There will
be an excess demand of 10 pounds in the El Salvadoran home market.El
Salvador’s domestic market for coffee will be in equilibrium.There will
be an excess demand for El Salvadoran coffee in the international market.The
international market for coffee will be in equilibrium.El Salvador
will export 4 pounds of coffee.
ANSWER: E
If the price
of El Salvadoran coffee falls to $6 in the international market:There will
be an excess supply of 8 pounds of El Salvadoran coffee in the
international market.El
Salvador’s domestic market for coffee will be in equilibrium.The
international market for coffee will be in equilibrium.There will
be an excess demand of 4 pounds for coffee in El Salvador’s home market.There will
be an excess supply of coffee in El Salvador’s home market.
Answer questions 30 and 31
using the data presented in the table.
The below shows the quantity demanded (in thousands) and quantity
supplied (in thousands) of computers in Guatemala and Honduras at different
prices. Guatemala and Honduras are the
only countries in the world.

Guatemala

El Salvador

Price

Quantity Demanded

Quantity Supplied

Quantity Demanded

Quantity Supplied

$1,200

50

10

60

10

$1,400

45

30

50

20

$1,600

40

50

40

30

$1,800

35

70

30

40

$2,000

30

90

20

50

According to
the table above, the international equilibrium price of computers is:$2,000$1,600$1,800$1,400$1,200
According to
the data in the table, the equilibrium quantity of computers traded in the
world market is:20,000
computers.30,000
computers.10,000
computers.15,000
computers.40,000
computers.