LOG221: The president of a remote island nation has closed the borders of this country to international trade because of the COVID-19 pandemic: International Trade Management Assignment, SUSS, Singapore

Problem set Instructions:

The final problem set is a combination of multiple-choice and short answer questions.

There are two sections. The first section asks you to answer multiple-choice questions and to explain your answers briefly. The second section asks you to provide short answers to case-study-based questions.

SECTION A

Answer each question and explain as per the instructions at the bottom of each question.  

QUESTION A.1

The president of a remote island nation has closed the borders of this country to international trade because of the COVID-19 pandemic. Prices of goods and services in this country will be governed by what principle?

A. Autarky.

B. Oligopoly.

C. Autonopoly.

D. Bertrand collusion equilibrium.

Explain your answer in up to 200 words and using a diagram

QUESTION A.2

Melitz explains that under free trade

a. No firms will compete in the imported good market.

b. The most efficient firms will compete in the imported good market.

c. The least efficient firms will collude in the imported good market.

d. The most efficient firms will create an efficient-oligopoly paradigm, but only in the imported good market.

Explain your answer in up to 200 words and use a diagram

QUESTION A.3

In the Pure Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C, and Land (A) is specific to W. If the government imposes a tariff on the imports of W then

a. Both owners of K and owners of A will benefit.

b. Owners of A will benefit.

c. Owners of K will benefit.

d. Neither owners of K nor owners of A will benefit.

Explain your answer in up to 200 words and using a diagram

QUESTION A.4

In a Mixed Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then 

a. Both owners of K and owners of A will benefit.

b. Owners of A will benefit.

c. Owners of K will benefit.

d. Neither owners of K nor owners of A will benefit.

Explain your answer in up to 200 words and using a diagram

QUESTION A.5

A country imposing a tariff can benefit in terms of social welfare if

a. If it is large.

b. If it is small.

c. If it is unskilled-labour intensive.

d. If it is skilled-labour intensive.

SECTION B

Short answer questions. 

Background

 Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.

You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursue a policy of import substitution industrialization (ISI).

You are given a brief about Ghana highlighting the following points:

• About half of Ghana’s population depends on agriculture, but Ghana still imports some of its food.
• The majority of Ghana’s people live in rural areas and exist on a subsistence way of life.
• Ghana has one of the highest rates of income inequality in the world.
• Nearly half of the population is employed in agriculture.

 QUESTION B.1       

Why would Ghana trade with a country that is very similar to it? Will trade between Ghana and an almost identical neighbor be governed by comparative advantage?

QUESTION B.2       

Explain import substitution industrialization and how it can affect Ghana.  What role does learning by doing a play and when does it make sense for the government to interfere?

QUESTION B.3       

The parliament of Ghana is debating whether import substitution should take the form of quotas or tariffs. You are asked to brief them on the difference between the two. A representative from Ghana’s National Labour Party is particularly worried about consumers? Which policy (tariffs or quotas) is better for consumers?

QUESTION B.4

The president of Ghana is proposing increasing tariffs on rice and providing local rice producers with a subsidy. Explain to parliament the welfare implications of this from the perspective of consumers, producers, and the government. Use diagrams to help your explanation.

QUESTION B.5       

After a meeting with Ghana’s president, you learn that the government is also interested in repatriating migrants that went to European countries to study engineering a decade ago. Explain how this is likely to change Ghana’s comparative advantage.