ECON7530 ONLINE QUIZ 2
INTERNATIONAL TRADE & INVESTMENT
国际贸易代考 Suppose that a large country imposes optimal tariffs on imports from another large country. The second country then responds with optimal…
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PART A: MULTIPLE CHOICE QUESTIONS 国际贸易代考
Each Question is worth 2 marks (40 Marks Total)
- Suppose that a large country imposes optimal tariffs on imports from another large country. The second country then responds with optimal tariffs on imports from the first country. For these two countries, the Nash equilibrium results in ___________ for the first country and __________ for the second country.
E.gains; unambiguous effect
2. Suppose that Australia is a large country, and it wishes to impose optimal tariffs on its imports of barley, wheat, and rice. The export supply elasticities of barley, wheat, and rice are 100, 10, and 2, respectively. Which of the following ranks the products on the basis of their optimal tariffs from lowest to highest tariff?
A.barley, wheat, rice
B.rice, barley, wheat
C.wheat, rice, barley
D.rice, wheat, and barley
E.Not enough information to answer
3. Which of the following statements is(are) TRUE? 国际贸易代考
I.Trade creation is always bad for countries.
II.Trade diversion is always good for countries.
III. Regional trade agreements can cause welfare losses.
E.I, II, and III2
- Suppose in a Ricardian model, there are two countries, Australia and France, and two products, cherry and wine. To produce 1 box of cherry, it takes Australia 4 working hours, and France 6 working hours. To product 1 bottle of wine, it takes Australia 3 working hours, and France 4 working hours. Then, Australia and France have a comparative advantage in _______.
A.cherry and wine, respectively
B.wine and cherry, respectively
E.no country has a comparative advantage in any products.
5.Suppose that two countries begin to trade a product that is subject to external economies of scale. Then, the country with the ________ rate of production will ________ production until it controls ________ of the market.
A.higher; increase; 50%
B.higher; decrease; 0%
C.lower; increase; 100%
D.lower; increase; 50%
E.lower; decrease; 0%
6.Suppose that the world price of rice is $150 per ton. If a small country gives its rice exporters a subsidy of $30 per ton, then as a result of the export subsidy, the domestic producers will receive ________ if it exports, and ______ if it sells on the domestic market.
7. Suppose that on the same PPF of a country, there are two points, signifying two bundles of consumptions, A and B. Then, 国际贸易代考
A.the country can produce either of the two bundles.
B.both bundles must have the same relative cost.
C.consumers must prefer one bundle to another.
D.consumers are indifferent between the two bundles.
E.producers are indifferent between the two bundles.
8.Which of the following is an effect of an import quota imposed by a small nation?
A.It reduces producer prices.
B.It generates revenue for the nation.
C.It increases production by domestic industries.
D.It causes an increase in imports of the product.
E.None of the above.
9.Suppose that in a monopolistically competitive market, a firm faces a demand curve of 𝑄 = 100 − 4𝑃. If 𝑃 = 20, what is its marginal revenue?
10.A small country in international trade faces:
A.a perfectly elastic world demand curve.
B.a perfectly inelastic world demand curve.
C.a perfectly elastic world supply curve.
D.a perfectly inelastic world supply curve.
E.an upward sloping world supply curve 国际贸易代考
11.According to the Heckscher-Ohlin model, the rent of capital should increase when _____.
A.the capital to labour ratio increases
B.the labour to capital ratio increases
C.a country’s capital stock increases
D.a country’s labour force decreases
E.none of the above, the rent only changes if a country starts trading
12.If a large country imposes a tariff:
A.the terms of trade effect will offset deadweight losses on its economy.
B.the terms-of-trade effect can never offset deadweight losses on its economy.
C.there will be no terms-of-trade effect.
D.the country may be better off.
E.the country will always be worse off.
13.In the 1980s, the United States used _________ to restrict imports of Japanese automobiles.
A.local content requirement
B.voluntary export restraints
14.Suppose country A currently produces widgets. Then it establishes a preferential trading agreement with country B. Following the formation of a free trade area between A and B, country A no longer produces widgets and instead imports widgets from country B. What has occurred?
A.There is trade diversion and a welfare gain for both country A and country B.
B.There is trade diversion, a welfare gain for country B, and a welfare loss for country A.
C.There is trade diversion and a welfare loss for both country A and country B.
D.There is trade creation and a welfare gain for both country A and country B.
E.There is trade creation, a welfare gain for country B, and a welfare loss for country A.
15.The long-run market supply curve in the presence of internal economies of scale is ________, and in the presence of external economies of scale, it is ________.
A.upward sloping; downward sloping
B.upward sloping; horizontal
C.horizontal; upward sloping
D.downward sloping; horizontal
E.downward sloping; downward sloping4
16.A firm in long-run equilibrium under monopolistic competition will earn 国际贸易代考
A) positive oligopoly profits because each firm sells a differentiated product.
B) positive economic profit if it engages in international trade.
C) positive monopoly profits because each sells a differentiated product.
D) zero economic profits because of free entry.
E) negative economic profits because it has economies of scale.
17.Suppose that China decides to reduce its steel export subsidy. Overall, will China gain or lose in welfare?
A.China will always gain by reducing its subsidies.
B.China will always lose by reducing its subsidies.
C.China will gain if the reduction in its deadweight losses exceeds its terms-of-trade gains.
D.China will gain if its terms-of-trade gains exceed the reduction in its deadweight losses.
E.China will lose if its terms-of-trade losses exceed the reduction in its deadweight losses.
18.A policy of tariff increase in the computer industry in France is
A.in the interest of France as a whole and in the interest of computer producers of France.
B.in the interest of France as a whole, but not in the interest of computer producers of France.
C.not in the interest of France as a whole, but in the interests of computer producers of France.
D.not in the interest of France as a whole and not in the interests of computer consumers.
E.not in the interest of France as a whole, but in the interests of foreign computer producers.
19.When the PPF shifts out relatively more in one direction, we have
20.Compared with voluntary export restraints, welfare losses from a tariff will be ____________.
D.higher for a large country, and smaller for a small country
E.smaller for a large country, and higher for a small country
PART B: SHORT-ANSWER QUESTION (60 MARKS) 国际贸易代考
- Answer ALL questions in Part B. Questions in Part B carry marks as indicated.
- Please show all workings. Round your answers to two decimal places.
- Fully label your graphs, if you are required to draw one.
B1. (14 marks)
a.(4 marks) Why do countries persist in using protectionism even though most economists believe that tariffs and quotas yield welfare losses to consumers?
b.(5 marks) Suppose that Vietnam is exporting food and importing clothing. Due to over-farming, the soil quality in Vietnam decreases, resulting in a reduction in agricultural productivity. This causes a reduction in the amount of food that can be produced in Vietnam at any time, as well as an increase in the world price of food relative to clothing 𝑝𝑓⁄𝑝𝑐 . Using the production possibility frontier graph for Vietnam, shows how this can result in an overall reduction in welfare for Vietnam.
c.(5 marks) Consider the scenario in part (b). As a matter of fact, the situation might not be all gloomy, and Vietnam can instead enjoy an increase in overall welfare from this. Explain under what circumstance can Vietnam gain in welfare from the situation, supporting your answer with the PPF graph for Vietnam.
B2. (24 marks) 国际贸易代考
Suppose that fixed costs for a firm in the truck manufacturing industry (start-up costs of factories, automation chain, etc.) are $9 billion, and that variable costs are $25,000 per finished truck. Suppose that the truck market is monopolistically competitive, and firms are identical. More firms increase competition, and so the market price falls as more firms enter the market, making the market price to be 𝑃 = 25,000 + 300/𝑛, where 𝑛 represents the number of firms in the market. Assume that there are three countries in the world: England, Scotland, and Wales, with the market size being 600 million, 450 million, and 300 million, respectively.
a.(2 marks) Calculate the equilibrium number of firms in England truck markets in autarky.
b.(2 marks) What is the equilibrium price of trucks in England if there is no international trade?
c.(7 marks) Now suppose that the three countries join to form a free trade area named LUKMO (literally-the-UK-minus-one), and assume no transportation costs. How many firms will there be in the combined market? What will be the new equilibrium price, and average cost for each truck?
d.(7 marks) Suppose instead that after a referendum, Scotland leaves the free trade area, so that the free trade area now only consists of England and Wales. Calculate the number of firms, the equilibrium price, and average cost for each truck in this combined market.
e.(6 marks) Compare the number of firms and the price that English consumers pay for each truck between the scenarios in (b), (c) and (d). In which scenario would English consumers benefit the most? Explain why.
B3. (22 marks)
Suppose there are three countries in the world: Australia, New Zealand, and Vietnam. Australia’s domestic demand for headphone follows
a.(6 marks) What is the equilibrium price and quantity of headphone in Australia? How many headphones will Australia import, and how much tariff revenue will the Australian government collect? Suppose now that Australia signs a free trade agreement (FTA) with New Zealand.
b.(6 marks) What is the price of headphone in Australia? How many headphones will Australia import, and from which country? How much tariff revenue will the Australian government collect?
c.(4 marks) Is this the case of trade creation or trade diversion as a result of Australia forming an FTA with New Zealand? Explain why.
d.(6 marks) Calculate the total welfare gain/loss to Australia as a result of the Australia-New Zealand FTA, by calculating the change in producer surplus, consumer surplus, and government revenue in Australia.