Question

The country of Rainbows exports seeds to the country of Farmington. Information for the quantity demanded (Qd) and the quantity supplied (Qs) for each country, in a world without trade, are given in the tables below.

Rainbows:

Price ($)	Qd	Qs
60	230	180
70	200	200
80	170	220
90	150	240
100	140	250

Farmington:

Price ($)	Qd	Qs
60	430	310
70	420	330
80	410	360
90	400	400
100	390	440

What is the equilibrium price and quantity for each country?

Question 1 options:

	Rainbows: Price = $60, Quantity = 50, Farmington: Price = $60, Quantity = 120
	Rainbows: Price = $100, Quantity = 110, Farmington: Price = $100, Quantity = 50
	Rainbows: Price = $80, Quantity = 170, Farmington: Price = $80, Quantity = 410
	Rainbows: Price = $70, Quantity = 200, Farmington: Price = $90, Quantity = 400

Question 2

In Chile, one worker can harvest 4 pounds of peppers or 4 pounds of coffee beans. In Argentina, one worker can harvest 2 pounds of peppers or 8 pounds of coffee beans.

a) Which country has the comparative advantage harvesting peppers?  

b) Which country has the comparative advantage in harvesting coffee beans?

Question 2 options:

	a) Argentina , b) Chile
	a) Argentina , b) Argentina
	a) Chile, b) Chile
	a) Chile, b) Argentina

Question 3 (1 point)

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The country of Rainbows exports seeds to the country of Farmington. Information for the quantity demanded (Qd) and the quantity supplied (Qs) for each country, in a world without trade, are given in the tables below.

Rainbows:

Price ($)	Qd	Qs
40	150	120
50	130	130
60	110	150
70	100	170
80	90	180

Farmington:

Price ($)	Qd	Qs
40	310	190
50	300	220
60	290	250
70	280	280
80	270	310

What is the equilibrium price and quantity if trade is allowed to occur?

	Price = $60, Quantity = 400
	Price = $60, Quantity = 180
	Price = $60, Quantity = 100
	Price = $60, Quantity = 40

Question 4

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

What is the opportunity cost for Japan and Malaysia for producing 80 additional radios?

Question 4 options:

	Japan = 5 tons rubber, Malaysia = 10 tons of rubber
	Japan = 5 tons rubber, Malaysia = 20 tons of rubber
	Japan = 10 tons rubber, Malaysia = 10 tons of rubber
	Japan = 10 tons rubber, Malaysia = 20 tons of rubber

Answer 1

(1) At equilibrium; Qd = Qs.

For country rainbow, Qd = Qs = 200 at the Price of $70.

For Counrty Framington, Qd = Qs = 400 at the price of $90

Thus, the equilibrium price and quantity of each country as follows:

Rainbows: Price = $70, Quantity = 200, Farmington: Price = $90, Quantity = 400

Answer: Option (D)

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(2) Per worker production.

	Peppers	Coffee
Chile	4	4
Argentina	2	8

In Chile, one worker can harvest 4 pounds of peppers or 4 pounds of coffee beans. In Argentina, one worker can harvest 2 pounds of peppers or 8 pounds of coffee beans

	Opportunity cost of producing Peppers in terms of Coffee	Opportunity cost of Coffee in terms of Peppers
Chile	(4/4) = 1 coffee	(4/4) = 1 pepper
Argentina	(8/2) = 4 coffee	(2/8) = 0.25 pepper

(a) Chile's opportunity cost of producing peppers is lower than the Argentina opportunity cost of producing peppers.

Hence, Chile has a comparative advantage in the production of peppers.

(b)Argentina's opportunity cost of producing coffee is lower than the Chile's opportunity cost of producing Coffee.

Hence, Argentina has a comparative advantage in the production of coffee.

Answer: Option (D)

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(3)

Rainbow is a exporter of seeds to the country. At price of $60 in rainbow, Quantity demanded (Qd) is 110 and Quantity supplied (Qs) is 150. Hence, the rainbow will consume 110 units domesticaly and export 40 units to Framington.

In Framington, at a price of $60 Quantity demanded (Qd) is 290 and Quantity supplied (Qs) is 250. Since, it has shortage of 40 units at price of $60. Framington will buy 40 units at price of $60 from Rainbow and meet their domestic demand. Hence, after trade framington will consume 290 units.

Thus, rainbow will consume 110 units and framington will consume 290 units after trade. So, total quantity will be 400 units (i.e., 110 + 290)

Answer: Option (A)

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(4) Per worker production

	rubber	radios
Japan	5	80
Malaysia	10	40

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

The opportunity cost of producing 80 radios in Japan is 5 tons of rubber. It means Japan has to sacrifice 5 tons of rubber in order to produce 80 radios.

The opportunity cost of producing 50 radios in Malaysia is 10 tons of rubber, so for 80 radios it will be 20 tons of rubber.

Answer: Option (B)