Information for questions 1-11 Note: for this question group…

Information for questions 1-11 Note: for this question group, use any information only after it is given (the most important information is underlined). For example, in the beginning of the group the country is in autarky. Do not use any information given later, about the country when it is trading. Two goods are produced in the world: flowers and candy. The figure shows the Production Possibilities Frontier for Country A in the two goods. Two straight lines, of slope 0.45 and 1.0, are also shown, and both are tangent to the PPF. Finally, an indifference curve is shown. There are two other countries in the world: Country B, with which Country A can trade, but only in some later questions (see below); and Country C, which never trades with anyone. To begin, Country A is in autarky, and its autarky price of flowers is $4.5, its autarky price of candy is $10. For the remainder of this group, ignore Country C, which will remain in autarky forever. Country A and Country B are engaged in free trade with each other; the world price ratio (PF/PC) is 1.0; flowers are the labor-intensive good and candy is the capital-intensive good. Complete the sentence: when the two countries start trading, real wages in Country A ________, and real wages in Country B ________ .

Information for questions 18-25 The following graph depicts…

Information for questions 18-25 The following graph depicts the supply and demand curves for sugar in the US. The world price of sugar under free trade is PW. If the US imposes either a tariff or a quota, the price of sugar in the US goes up to P′, while the world price goes down to P′W. Areas are denoted by lower-case letters, points on the axes are capital letters. Which is the autarky price of sugar in the US?