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Part A (Four (4) questions only, citations and references are not required)
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Answer to Question 1.
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Answer to Question 3.
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Answer to Question 4.
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Mock Final Exam 1
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Question 1
Explain how trade can take place based on Dynamic Technological Differences. Explain, and
compare this with the answer you would give for the Heckscher-Ohlin model. Diagram/s
required.
[25 marks]
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Question 2
Suppose Home as shown in Figure 1 is a small exporter of wheat. At the world price of $100
per ton, Home growers export 20 tons. Suppose the Home government provides its domestic
producers with an export subsidy of $40 per ton. Use the following figure to answer these
questions.
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a.
What is the quantity exported with the export subsidy? Explain.
[5 marks]
b.
Calculate the effect of the export subsidy on (show your working):
i.
Consumer surplus
ii.
Producer surplus
iii.
Government revenue
3g
c.
[5 marks]
[5 marks]
[5 marks]
Calculate the overall net effect of the export subsidy on Home welfare. [5 marks]
O
300
Question 3
(a)
For part (i) to (iv), please show your working.
i.
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[4 marks]
ii.
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[4 marks]
iii.
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[4 marks]
iv.
The net effect on national well-being (gain/loss) from imposing the tariff.
[5 marks]
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(b)
For part (i) to (iv), provide answers for the resulting effects of tariff as follows:
i.
The consumption effect
[1 mark]
ii.
The production effect
[1 mark]
iii.
Trade effect
[1 mark]
iv.
Revenue effect
[1 mark]
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Question 4
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What is an import quota? What are the partial equilibrium effects of an import quota? How are
they similar to and different from the effects of an equivalent import tariff? Use appropriate
diagram/s to demonstrate your answers.
[25 marks]
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