Suppose Mexico can produce 5 autos or 10 corn. Suppose the United States can produce 4 autos or 20 ...

Suppose Mexico can produce 5 autos or 10 corn. Suppose the United States can produce 4 autos or 20 corn. If opportunity costs are constant for both countries, which of the following would NOT be a potential terms of trade?
 
  A) 1 auto for 3 corn
  B) 1 auto for 4 corn
  C) 1 corn for 1/3 of an auto
  D) 1 corn for 1 auto

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Question 2 - If absolute PPP held, then the real exchange rate must be equal to
 
  A) a constant.
  B) one.
  C) zero.
  D) a positive number.

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Question 3 - The U.S. factor of production that is most likely to be made worse off because of NAFTA (because its factor payment will fall) is
 
  A) unskilled labor.
  B) skilled labor
  C) capital
  D) All of the above will be made worse off.

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Question 4 - What is the difference between positive and normative analysis?
 
  What will be an ideal response?