UNIVERSITY OF LONDON BSc Economics Mid Term 2017 Name: Student ID: For Internal Students of Royal Holloway DO NOT TURN OVER UNTIL TOLD TO BEGIN EC1111: INTERNATIONAL ECONOMIC POLICY Time Allowed: One hour and fifteen minutes Attempt ALL questions EC Calculators are permitted Royal Holloway University of London 2017 2017 -18 Page 1 of 6
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Question 1 A simplified economic system consists of only two countries: A and B. In a given week, Country A has 100 units of labour available, while Country B has 250 units of labour. The table below shows the maximum amount of a particular good that each country can produce in a week if all its labour is employed in that sector. Country Maximum Possible Quantity of Goods Produced per Sector Clothes Food A 250 500 B 1000 2500 a) Calculate the Unit Labour Requirements in all the sectors of each country. ULR = Total Labour Units fi (maximum unit produced) (4 marks) b) Determine which country has absolute advantage, explaining your answer. (4 marks) c) Carefully demonstrate where each country has comparative advantage, and where each should specialize. (7 marks) Page 3 of 6