Tackle the Test: Free-Response Questions

443

  1. Question

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    Suppose that rice is traded in the world market at a price of $1 per pound, and that in the absence of trade, the equilibrium price of rice in Mexico is $1.25 per pound.

    Rubric for FRQ 1 (6 points)

    image

    1 point: Graph with “Price” on the vertical axis, “Quantity of Rice” on the horizontal axis, downward-sloping demand, upward-sloping supply, and the no-trade equilibrium

    1 point: Horizontal rest-of-world supply curve and trade equilibrium as shown in the figure

    1 point: Correct indication of imported quantity

    1 point: Correct indication of domestically supplied quantity

    1 point: Horizontal rest-of-world supply + tariff curve and new trade equilibrium as in the figure

    1 point: Shaded area that represents tariff revenue as in the figure

  2. Question

    Suppose that cheese is traded in the world market at a price of €3 per pound. Assume that France has no trade barriers and has supply and demand curves for cheese as shown in the graph.

    image
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