Part I. After completing your trade simulation answer the following questions (keep in mind that you can complete the simulation as many times as you wish):
1. What is an absolute advantage? (2 points)
2. What is a comparative advantage? (2 points)
3. What is the country’s maximum amount of corn and cheese it can produce (PPF)? Fill out the table below for Uthania and Alphazia (4 points)
Cheese Corn
Rodamia 8 4
Uthania
Alphazia
4. What is the opportunity cost of production of one unit of cheese and 1 unit of corn for Uthania and Alphazia? (4 points)
Opportunity costs of producing
1unit of cheese 1 unit of corn
Rodamia 1/2 unit of corn 2 units of cheese
Uthania
Alphazia
5. What is the country’s maximum amount of watches and DVD players it can produce (PPF)? Fill out the table below for Rodamia, Suntize, and Uthania (6 points)
Watches DVD players
Rodamia
Suntize
Uthania
6. What is the opportunity cost of production of 1 unit of watches and 1 unit of DVD players for Suntize and Uthania ? Fill out the table; follow the answers from your trade simulation. (4 points)
Opportunity costs of producing
1 unit of watches 1 unit of DVD players
Rodamia 2/3 units of DVD players 1.5 units of watches
Suntize
Uthania
7. Does comparative advantage imply the country has the lowest opportunity cost of production? (2 points)
Yes___ No___
8. According to the information from questions 1-6, fill out the following table for the lowest opportunity cost (comparative advantage), lowest cost (absolute advantage) that is which country is able to produce the maximum units. You should put the relevant country in each cell ( 6 points) :
Cheese Corn Watches DVD Player
Absolute advantage Alphazia
Comparative advantage Rodamia
9. Will you import corn or cheese to Rodamia? From which country? Why? Does the simulation support your choice?(4 points)
10. Will you import watches or DVD players? From which country? Why? (4 points)
11. Will you impose a tariff or quota against dumping watches? (Check one) (3 points))
Tariff___________ Quota_________ I will not impose tariff or quota________
12. Explain your answer for question 10. Why did not impose a tariff or quota? Also indicate how much of quota or tariff you decided to impose? (3 points)
13. Will you impose a tariff to protect your corn industry? Yes___ No___(3 points)
14. Justify your answer for question 13. (3 points)
15. If you were to write a report to the president of Rodamia would you recommend a free trade (FTA) or trade with some restrictions? Explain your answer. (5 points)
16. Do Lisa Blake and Walter Barnes support Free Trade? Why or why not? What do they agree and disagree on? (5 Points)
17. What would be advantages of free trade for Rodamia? List at least 2 advantages. (5 points)
18. What are the limitations of free trade for Rodamia? List at least 2 limitations. (5 points)
19. How would trade affect Rodamia’s currency and exchange rate? (5 points)
20. What role do comparative and absolute advantages play in the trade agreement? Explain your logic and give example from the simulation (9 points)
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