| , BEET3013 CONFIDENTIAL Universiti Utara Malaysia FINAL EXAMINATION FIRST SEMESTER 2018/2019 SESSION COURSE CODE /NAME: BEET3013 INTERNATIONAL TRADE :10 JANUARY 2019 (THURSDAY) : 2.30-5.00PM (2 % HOURS) : DMS INSTRUCTIONS : 1, This examination paper contains FIVE( 5) questions in TWO (2) printed pages excluding the cover page. Candidates have to answer ALL questions in the answer booklet provided. . Candidates are NOT ALLOWED to take the examination paper and the answer booklet} out of the examination hall . Candidates are bound by the UUM's RULES AND PROCEDURES ON ACADEMIC FRAUD. Gn words} | IDENTIFICATION CARD NO. : Ee LECTURER’S NAME: croup: [_ | TABLE NO. : DO NOT OPEN THIS EXAMINATION PAPER UNTIL INSTRUCTE! CONFIDENTIALDBEETION3 INTERNATIONAL TRADE FIRST SEMESTER 20182019 SESSION MATRIC NO. QUESTION ONE (20 MARKS) ‘The following table shows the number of days of labor required to produce J unit of output of X and Y in Country A and B. x Y Country A 100 days 4 days Country B 60 days ___ 3 days a) Calculate the autarky price ratios. (4 marks) b) Which country has a comparative advantage in X and which country has a comparative advantage in Y? Explain why? (4 marks) ©) If the terms of trade are 1C: 22W, how many days of labor does Country A save per unit of its import good by engaging in trade? How many days does Country B save per unit of its import good? (4 marks) 4) Ie the term of trade are 1C:24W, how many days of labor do Country A and B each save Per unit of their respective import good? (4 marks) ©) What can be said about the comparative distribution of the gains from trade between Country A and B in part d) and part c)? Why? (4 marks) QUESTION TWO (20 MARKS) ‘offer curve” (or “reciprocal demand curve”). (4 marks) a) Define the theoretical concept of a country b) Then, using a numericai example, construct two points on a country’s offer curve, assuming that the country exports textile and imports car. (6 marks) ©) Suppose that country I increases its willingness to trade at the same time that trading partner country II decreases its willingness to trade. What can be said about the resulting impact on the terms of trade and on the volume of trade? (10 marks)[BEET30U3 INTERNATIONAL TRADE FIRST SEMESTER 2018/2019 SESSION MATRICN' QUESTION THREE (20 MARKS) a) Suppose that the K/L ratio is higher in France than in Spain. What would you expect to happen to wages in France as trade took place between the two countries? (10 marks) b) Discuss the basis for trade and the pattern of trade according to Heckscher ~Ohlin. (10 marks) QUESTION FOUR (20 MARKS) a) Ina small country, why does growth in only one factor lead to either an ultra-protrade or an ultra-antitrade production effect? (10 marks) b) Developing countries are often concemed that their terms of trade might deteriorate as economic growth occurs, this phenomenon is known as “immiserizing growth”. Using a ‘graph, explain this situation. (10 marks) QUESTION FIVE (20 MARKS) a) At the international price of $20/unit, domestic production is 5,000 units and domestic consumption is 6,000 units. With a 20 percent tariff, domestic production increases by 20 percent and domestic consumption decreases by 25 percent. (i) What is the effect of this tariff on the affected parties? (6 marks) (ii) What is the net welfare effect on the country as a whole? (4 marks) b) Why might a large country like the United States have a greater incentive than a small country to use trade restriction? (10 marks) END OF QUESTIONS