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IE Mid-Term Review

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33 views4 pages

IE Mid-Term Review

1111111111

Uploaded by

luuanh.fis.hanu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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FACULTY OF INTERNATIONAL STUDIES

INTERNATIONAL ECONOMY

MID – TERM EXERCISES REVIEW

Lecturer: BÙI HOÀNG TRUNG


EXERCISE 1
Assumption:
- There are two countries in the world, US and UK, both of them are producing only two products which are
Wheat and Cloth.
- Free trade is available between 2 countries;
- Labor is the unique factor of production; and
- It is free to move domestically but not abroad.
- Other factors are constant (technology is fixed, no logistic cost, perfect competition in both markets, trade is
balanced between two countries)

US UK

WHEAT (Bushels/hour) 6 1

CLOTH (Roll/hour) 4 5

➔ Question:
1. What is the product that each country has the absolute advantage in production?
2. With trade, which product each country will specialize in production?
3. How much does each country gain if the trading ratio is 6W = 18C
EXERCISE 2
Assumption:
- There are two countries in the world, US and UK, both of them are producing only two products which are
Wheat and Cloth.
- Free trade is available between 2 countries;
- Labor is the unique factor of production, and
- It is free to move domestically but not abroad.
- Other factors are constant (technology is fixed, no logistic cost, perfect) competition in both markets, trade is
balanced between two countries)

US UK

WHEAT (Bushels/hour) 6 1

CLOTH (Roll/hour) 4 2

➔ Question:
1. What is the comparative advantage of each country ?
2. If the ratios is 6W = 18C, is there any trade between two countries, what countries will refuse trading ?
3. What are the trading ratios with which both countries benefit ?
EXERCISE 3
Assumption:
- The QDx and QSx are the demand curve and supply curve of produc X in nation named Westeros, in which:
- QDX = –20PX + 90, and QSX = 10PX.
- QDX and QSx are the quantity of product
- Px is the price of the product X, and PW = PX = 1 USD

➔ Question:
1. Analyze the market of X in the condition of free trade ?

❖ In order to protect the domestic industry, the government of Westeros impose a tariff of 100% on every pieces
of product X that is imported in Westeros.

2. Analyze the market of X in Westeros when the tariff is 100% ?

3. How much will each party gain/loss in the condition of 100% tariff ?

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