Page 1 of 2 | UFS | uv UNIVERSITY OF THE FREE STATE QWA-QWA CAMPUS DEPARTMENT OF ECONOMICS CONTACT NUMBER: 051 401 3271 EXAMINATION: ADDITIONAL MID-YEAR 2017 PAPER 1 ASSESSOR(S): Dr A. van Niekerk & Mr C. Mudzingiri MODERATOR(S): Mrs. Karlien Stemmet TIME: 3 hours MARKS: 100 Instruction: This paper consist of 3 questions on 2 pages. Answer all the questions. QUESTION 1 (40) 1.1 Briefly explain each the following international economics terms: 1.1.1 Marginal rate of transformation Q) 1.1.2. Factor intensity reversal Q) 1.1.3 Demand reversals Q) 1.14 Consumer surplus Q) 1.1.5 Effective tariff protection Q 1.2. “The U.S. has tried to counteract the negative impact of cheap Chinese steel by upping its tariffs on imports of cold rolled steel, which is used in car production and construction, from China to 522 percent, saying that China had not cooperated in its investigations into dumping practices.” 1.2.1 Explain the concept of a monopoly practicing dumping and how such an action can be profitable, 6) 1.2.2 Suppose WTO investigators conclude that the dumping of steel is taking place. Explain the conditions that will make it possible for China to successfully dump steel in other countries. 3)Page 2 of 2 1.3 Illustrate and explain the Heckscher-Ohlin theory of international trade, Also explain how, price equalisation takes place. (10) 1.4 Compare the Product Life Cycle theory with the Differentiated products theory of international trade. Make use of illustrations where necessary. (12) QUESTION 2 (43) 2.1 Explain and illustrate why traders in a ‘free trade world” should be worried about the impact of transport costs on trade volume and terms of trade. Choose any two countries and use them as an example to support your answer. (10) 2.2 Illustrate, using two graphs, and explain the difference between an Ultra export-biased increase in production and an Ultra import-biased increase in production due to technological changes (e.g. discovery of new technology for production) (10) 2.3 The USA as a large economy is set to benefit from the imposition of import tariffS, as suggested by the President elect, Mr Donald Trump. Graphically explain the effects of an import tax on all relevant role players in the USA. (8) 2.4 In terms of economic integration, illustrate and explain the difference between trade creation and trade diversion when a Customs Union is formed. Use your own example. (10) 2.5 Discuss how the exchange rate is determined under the purchasing power parity approach. What are the major weaknesses of purchasing power parity? (5) QUESTION 3 a7) 3.1 Evaluate the roles of the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO) in globalisation and economic integration. (8) 3.2 Technological innovation plays a significant role in the escalation of globalisation, Discuss this development in the context of the interplay between social globalisation and economic globalisation. © 3.3 Africa can vastly benefit from globalisation. Explain the key requirements for Africa to become globally more competitive. B) sEND OF PAPERS