Exam 2: Tools of Analysis for International Trade Models

The absolute value of the slope of the production possibilities frontier at the production point provides a measure of both the relative price of S in terms of T and the opportunity cost of producing one more units of S calculated in terms of output of T foregone.

Production under increasing opportunity costs can result from the two industries using factors of production in different combinations.

If individuals have money illusion,they react to changes in certain prices without regard to simultaneous changes in other prices.

Per capita real GDP levels provide one possible measure of a country's standard of living.

Explain the relationship between relative prices and the slope of a country's production possibilities frontier.

Use a diagram to describe how general equilibrium is reached when a country is subject to increasing opportunity costs.In your answer, (a) find and label the country's equilibrium production and consumption points and the relative price of S at equilibrium. (b) explain carefully how the economy would move to equilibrium if it were not initially in equilibrium.

If the autarky price of S were lower in country A than in country B,then if trade were allowed

Real GDP changes when

________ analysis by economists refers to the attempt to answer questions such as should a tax be imposed.

If the relative price of S in terms of T is 2 and S has a nominal price of $1,then the nominal price of T is

An indifference curve

-Refer to the figure above.In autarky,the economy would be in general equilibrium at point

-Refer to the figure above.If tastes were to change so that S became more preferred relative to T,then,in autarky,production and consumption would move from their initial equilibrium to a point such as

General equilibrium occurs in autarky at the point where the community indifference curve intersects the production possibilities frontier.

If a country has a straight (downward sloping)production possibilities frontier,then production is said to be subject to

If the relative price of S in terms of T is 2 and S has a nominal price of $1,then the relative price of T is

-Refer to the figure above.If the relative price of S were to increase,then the price line would

An indifference curve represents the collection of goods and services that an individual has no desire to consume.

Indifference curves intersect at the point of utility maximization.

If a country is subject to increasing opportunity costs,its national supply curve (i.e.the locus of national output levels of S at various relative prices of S. will have a ________ slope.