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For Questions 1 – 8, make the
following assumptions about the Domestic Market for

Avocados:

           
A)        The world Price for
Avocados is $5 per bushel

           
B)        Mexico has Comparative
Advantage in the production of Avocados

C)        In the U.S. Domestic
market for Avocados (with NO imports), the Equilibrium Price of
Avocados is $10 per bushel, and the Equilibrium Quantity is 2,500
bushels per month.

1)         Under an
Embargo, the price for Avocados in the US would be

           
a)         Under $5

           
b)         about $5

           
c)         Between $5 and
$10

           
d)         about $10

           
e)         More than
$10

2)         Under a Free
Trade scenario, the price for Avocados in the US would be

           
a)         Under $5

           
b)         about $5

           
c)         Between $5 and
$10

           
d)         about $10

           
e)         More than
$10

3)         If the U.S.
permitted Mexican imports, but enacted a $2/bushel Tariff, the
price for Avocados in the US would be

           
a)         Under $5

           
b)         about $5

           
c)         Between $5 and
$10

           
d)         about $10

           
e)         More than
$10

4)         If the U.S.
permitted Mexican imports, but enacted an import Quota, the price
that Mexican Producers selling Avocados in the US would receive
would be

           
a)         less than the world
price

           
b)         the same as the
world price

c)         higher than the
world price, but less than the US Domestic Equilibrium Price under
an embargo

d)         the same as the
Domestic Equilibrium Price under an embargo

e)         higher than the
Domestic Equilibrium Price under an embargo

5)         If the U.S.
permitted Mexican imports, the EQUILIBRIUM QUANTITY of Avocados
sold in the US would be

           
a)         Less than 2,500
bushels

           
b)         2,500
bushels

           
c)         More than 2,500
bushels

           
d)         Impossible to
determine

           
e)         Higher than
2,500 bushels in the eastern US, but lower in western states

6)         American
Consumers would pay the least amount for Avocados under which
scenario?

           
a) Embargo of all Imports

           
b) Tariff on Imports

           
c) An Import Quota

           
d) Free Trade

           

7)         American
Consumers would buy the largest quantity of Avocados under which
scenario?

           
a) Embargo of all Imports

           
b) Tariff on Imports

           
c) An Import Quota

           
d) Free Trade

8)         American Avocado
Growers would receive the highest price for their product under
which scenario?

a) Embargo of all Imports

           
b) Tariff on Imports

           
c) An Import Quota

d) Free Trade

9)          
If China has Comparative Advantage in shoes and the United States
has comparative advantage in light bulbs, then

a)         China will
export shoes to the US, and the US will export light bulbs to
China

b)         China will
export light bulbs to the US, and the US will export shoes to
China

           
c)         China will
export both products to the US

           
d)         The US will
export both products to China

           
e)         Trade will not
take place

10)      
Ecuador has Comparative Advantage in Limes. Portugal has
Comparative Advantage in Wine. However, Ecuador has Absolute
advantage in both products. Which is the most likely scenario under
free trade?

           
a)         Ecuador will
export both products to Portugal

           
b)         Portugal will
export both products to Ecuador

           
c)         No trade will
take place

d)         Ecuador will
export Wine to Portugal, and Portugal will export Limes to
Ecuador

e)         Ecuador will
export Limes to Portugal, and Portugal will export Wine to
Ecuador