Quiz 2 – Econ 4 True False: Answer A for True and B for False. Please keep your answers covered with your hand so people cannot cheat off of you, thanks in advance. We will NOT be coming back to questions so make sure you answer in allotted time.

1. If Adam Smith were still alive he would be a proponent of protection (trade barriers) since protection is consistent with workers maximizing their individual welfare.

2. In a free trade environment, the distribution of income tends to be more unequal relative to a closed economy, no trade environment.

3. If you have the highest opportunity cost in an activity then you are said to possess a comparative advantage that activity.

4. Workers that have a comparative advantage in an activity are usually the first ones to cry out for trade protection (tariffs and quotas) so that they can keep their jobs.

5. We argued that the US has more flexible labor markets than many of our trading partners which implies that the US is more likely to benefit from free trade than our trading partners.

Put your pencil down – no more writing allowed as everyone is now done with quiz #2

Quiz 3 – Econ 4 True False: Answer A for True and B for False. Please keep your answers covered with your hand so people cannot cheat off of you, thanks in advance. We will NOT be coming back to questions so make sure you answer in allotted time.

1. A person who can produce same amount of a good with fewer resources (less inputs) than another person is said to possess an absolute advantage.

2. According to the Samuelson model, if the innovation gap closes then US welfare may fall to the point where we would be better off, in terms of welfare, if we closed the economy and therefore, conducted no trading of goods and services with the rest of the world.

3. Suppose the exchange rate last week was one euro = $1.40. This week it is one euro = $1.30. Given this change we can say that the US$ has gotten stronger.

4. A weaker US$ implies less inflationary pressures since a weaker US $ implies people will buy less US produced goods and services.

5. When we refer to “a race to the bottom,” we are simply stating that firms cut corners to lower the opportunity costs of production in hopes of gaining a comparative advantage.

Put your pencil down – no more writing allowed as everyone is now done with quiz #3