EC311: International Economics

Answer ALL of the Following Questions:

  1. Explain each of the following concepts in no more than 50 words (2.5 marks each):
    1. Most favoured nation (MFN)      F. Intra-industry trade
    1. External economies of scale       G. Trade diversion
    1. Internal economies of scale        H. Agglomeration
    1. Quota rents          I. Dynamic increasing returns
    1. Vertical foreign direct     J. Corporate social investment         responsibility
  2. Discuss in no more than 500 words the key facts and causes characterising the β€œGreat Trade Collapse”. (25 marks)
  3. Explain using a diagram the partial equilibrium effects of an import quota when the expected future price of a commodity increases. Analyse (using a separate diagram) the partial equilibrium effects of an import quota if the population size increases. (30 marks)
  4. Calculate the rate of effective protection when 𝑑 (the nominal tariff on the final commodity) is 40 percent, π‘Žπ‘– (the ratio of the cost of the imported input to the price of the final commodity) is 0.5, and 𝑑𝑖 (the nominal tariff on the imported input) is 40 percent. Recalculate the rate of effective protection if 𝑑𝑖 = 20 percent. Set 𝑑𝑖 = 40%, recalculate when π‘Žπ‘– = 0.6. What general conclusion can you reach about the relationship between the rate of effective protection and 𝑑 from your answers above? (20 marks)

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