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Title Name amity assignment for MBA IB on International Economics and Policy
University AMITY
Service Type Assignment
Course MBA
Semester Semester-III-Int.Bus.. Course: MBA
Short Name or Subject Code International Economics and Policy
Commerce line item Type Semester-III-Int.Bus.. Course: MBA
Product Assignment of MBA Semester-III-Int.Bus.. (AMITY)
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Solved Assignment


  Questions :-

International Economics & Policy

1 .        A century ago, most French imports came from relatively distant locations: North America, Latin America, and Asia. Today, most French imports come from European countries. How does this fit with the changing types of goods that make up world trade?      

2 .        Canada and Australia are mainly English-speaking countries with populations that are not too different in size (Canada is 60 percent larger.) But Canadian trade is twice as large, relative to GDP, as Australia´s. Why should this be the case?         

3 .        How does the fact that many goods are nontraded affect the extent of possible gains from trade?

4 .        Suppose that there are many countries capable of producing two goods and that each country has only one factor of production, labour. What could we say about the pattern of production and trade in this case?  

5 .        "The world´s poorest countries cannot find anything to export. There is no resource that is abundant - certainly nor capital or land, and in small poor nations not even labour is abundant." Discuss.       

6 .        In many developed countries, labour movements represent blue-collar workers rather than professionals and highly educated workers, and traditionally favour limits on imports from less-affluent countries. Is this a shortsighted policy or a rational one in view of the interests of union members? How does the answer depend on the model of trade?          

7 .        In some economies relative supply may be unresponsive to changes in prices. For example, if factors of production were completely immobile between sectors, the production possibility frontier would be right-angles, and output of the two goods would not depend on their relative prices. Is it still true in this case that a rise in the terms of trade increases welfare?    

8 .        It is just as likely that economic growth will worsen a country´s terms of trade as that it will improve them. Why, then, do most economists regard immeserizing growth, where growth actually hurts the growing country, as unlikely in practice?   

Case Detail: 

Another major reason that international trade may take place is the existence of economies of scale (also called increasing returns to scale) in production. Economies of scale means that production at a larger scale (more output) can be achieved at a lower cost (i.e. with economies or savings). When production within an industry has this characteristic, specialization and trade can result in improvements in world productive efficiency and welfare benefits that accrue to all trading countries. Trade between countries need not depend upon country differences under the assumption of economies of scale. Indeed, it is conceivable that countries could be identical in all respects and yet find it advantageous to trade. For this reason, economies of scale models are often used to explain trade between countries like the US, Japan and the European Union. For the most part these countries, and other developed countries, have similar technologies, endowments and to some extent similar preferences. Using classical models of trade (Ricardian, Heckscher-Ohlin), these countries would have little reason to engage in trade. And yet, trade between the developed countries makes up a significant share of world trade. Economies of scale can provide an answer for this type of trade. Another feature of international trade that remains unexplained with classical models is the phenomenon of intra-industry trade. A quick look at the aggregate trade data reveals that many countries export and import similar products. For example, the US imports and exports automobiles, it imports and exports machine tools, it imports and exports steel, etc. To some extent intra-industry trade arises because many different types of products are aggregated into one category. For example, many different types of steel are produced, from flat-rolled to specialty steels. It may be that production of some types of steel require certain resources or technologies in which one country has a comparative advantage. Another country may have the comparative advantage in another type of steel. However, since all of these types are generally aggregated into one export/import category, it could appear as if the countries are exporting and importing "identical" products when in actuality they are exporting one type of steel and importing another type.

  1. In perfect competition, firms set price equal to marginal cost. Why isn´t this possible when there are internal economies of scale?
  2. Give two examples of products that are traded on international markets for which there are dynamic increasing returns. In each of your examples, show how innovation and learning-by-doing are important to the dynamic increasing returns in the industry.
  3. There are shops in Japan that sell Japanese goods imported back from the United States at a discount over the prices charged by other Japanese shops. How is this possible?

Question No.  1           Marks - 10

In the long run, countries with faster inflation have had       

Options          

 appreciating currencies          

 no change in the value of their currencies     

 depreciating currencies         

 at some times and in some places, appreciating currencies, while at other times in other places, depreciating currencies.

Question No.  2           Marks - 10

Which of the following observations about a tariff is not true? A tariff:      

Options          

 is usually an ad valorem tax  

 can raise revenues for the imposing government      

 usually benefits domestic producers more than consumers  

 can be used to protect foreign industries

Question No.  3           Marks - 10

An economic transaction is recorded in the balance of payments as a debit if it leads to    

Options          

 a payment to foreigners        

 the receipt of payments from foreigners       

 an increase in foreign exchange reserves      

 neither an inflow or an outflow of value.

Question No.  4           Marks - 10

Which of the following is not recorded as a debit item in the U.S. balance-of-payments accounts?           

Options          

 U.S. grain company engages Russian ships to carry U.S. wheat to Russian ports.  

 the U.S. Treasury contributes $1 million to the United Nations Development Fund.         

 a French firm sells 25-year bonds, valued at $100 million, in the United States     

 a West German firm pays $3 million in interest to the holders of its bonds in the US.

Question No.  5           Marks - 10

Which of the following is true with respect to the infant industry argument for protection?           

Options          

 It does not refer to temporary protection to establish a domestic industry. 

 To be valid, the return to the grown-up industry need not be sufficiently high to repay for the higher prices paid by domestic consumers of the commodity during the infancy period.  

 It is inferior to an equivalent production subsidy to the infant industry.     

 None of the above.

Question No.  6           Marks - 10

The nationally optimal tariff hopes to take advantage of the idea that         

Options          

 you can increase domestic producers’ well-being by keeping foreign competition minimal

 you can limit imports and extract low import prices from  foreign suppliers if you are a major world buyer          

 you can gain optimal tariff revenues for public purposes by taxing foreign imports

 you can charge optimal (minimal) tariffs and encourage good will from trade partners, leading to tariff-free exports for domestic producers and workers

Question No.  7           Marks - 10

Intra industry trade is more likely to occur between 

Options          

 rich and poor countries         

 countries with high and similar income levels          

 developing countries             

 developed and developing countries

Question No.  8           Marks - 10

If the general level of prices in the United States increases relative to prices in Japan,        

Options          

 the value of the dollar will likely depreciate relative to the yen.      

 the value of the dollar will likely appreciate relative to the yen.      

 the value of the dollar will likely remain constant relative to the yen.         

 not enough information is given.

Question No.  9           Marks - 10

The organization responsible for mediating trade disputes is the      

Options          

 International Monetary Fund.           

 World Trade Organization.   

 World Bank. 

 The G-7 Countries.

Question No.  10         Marks - 10

The optimal monopoly markup is       

Options          

 higher with more elastic demand for cartel sales      

 higher with less elastic demand for cartel sales        

 lower with less elastic demand for cartel sales         

 higher with more elastic supply schedules

Question No.  11         Marks - 10

An international cartel that maximizes its profits is optimal for        

Options          

 the member countries and the world

 the member countries but not the world       

 the consuming countries and the world        

 no country at all

Question No.  12         Marks - 10

The characteristics of quotas and tariffs are described correctly by which of the following:           

Options          

 tariffs assure a certain final price for imports, but not as surely as a quota does.     

 quotas assure a certain limited quantity of imports, but not as well as a tariff does.           

 quotas assure a certain final price for imports better than a tariff does.       

 tariffs do not assure a certain limited quantity of imports as a quota does.

Question No.  13         Marks - 10

Intervention at the source of a distortion in resource allocation problems and the use of policy tools closest to the sources of the distortions is called     

Options          

 public policy 

 benefit/cost analysis  

 the specificity rule     

 resource allocation

Question No.  14         Marks - 10

The best and probably rarest way to allocate import licenses is        

Options          

 applying rational rather than arbitrary (bureaucratic) criteria to award import licenses on the basis of merit.         

 avoiding injustice and favoritism by granting the scarce and highly demanded licenses on a purely random basis (regarded as the “lottery effect” of license distribution).      

 inviting the countries or firms who want to sell the commodity in question to participate in a competitive auction to be held by the customs agency of the importing country for import licenses.          

 achieving equity by assigning fixed shares to firms according to the market shares they have previously enjoyed in the market in question.           

Question No.  15         Marks - 10

“When a country exports a commodity produced with intensive use of its abundant factor, that factor’s returns will rise.” This statement is           

Options          

 The Hecksher-Ohlin theory   

 the Stolper-Samuelson Theorem       

 The Leontief paradox           

 the modern trade theory       

Question No.  16         Marks - 10

“Countries export commodities produced through the intensive use of factors which they possess in abundance. Labor abundant countries export labor-intensive commodities and import capital-intensive commodities.” This statement is    

Options          

 Classical Smith/Ricardo trade theory           

 the Stolper-Samuelson Theorem       

 The Leontief paradox           

 None of the above

Question No.  17         Marks - 10

The best way to characterize monopolistic competition is     

Options          

 a product group of ten to fifteen firms         

 a product group of fifteen to twenty firms   

 a product group with the same demand curve          

 a product group which perceives no interdependence

Question No.  18         Marks - 10

Wine costs $10, cloth costs fr 30 and the dollar exchange rate is fr 6.   The wine price in terms of cloth is:           

Options          

 3 cloth           

 3 wine           

 2 cloth           

 5 wine

Question No.  19         Marks - 10

Economies of scale are more likely to occur in          

Options          

 a small scale textile industry 

 the footwear industry           

 the aircraft industry  

 small business

Question No.  20         Marks - 10

In a monopolistic competition model of trade           

Options          

 if two countries have the same overall capital labor ratio there is no trade  

 there are gains from trade from an increased variety of goods and large firm scale

 firms earn positive economic profits in the long run 

 factor endowments do not play any role in determining inter industry trade

Question No.  21         Marks - 10

In the Heckscher Ohlin model, international trade is based mostly on a difference in         

Options          

 technology    

 product differentiation         

 economies of scale    

 factor endowments   

Question No.  22         Marks - 10

Intra-industry trade (IIT) is   

Options          

 the result of nations following their comparative advantage.           

 the result of capital-intensive nations trading with labor-intensive nations. 

 trade among the various firms of a single industry in one country.  

 two-way international trade in very similar products.

Question No.  23         Marks - 10

Biased growth implies           

Options          

 trade patterns cannot change

 the growing economy will have increased willingness to trade        

 the growing economy will have decreased willingness to trade       

 either b or c could be true.

Question No.  24         Marks - 10

According to modern (“alternative”) trade theory,   

Options          

 trade depends on scale economies, not consumer preferences         

 trade depends on consumer preferences, not scale economies.        

 historical quirks can lead to external economies which promote trade advantages  

 trade patterns are unrelated to the industrial or market structures (monopolistic competition or oligopoly) of traded goods.

Question No.  25         Marks - 10

Ricardo explained the law of comparative advantage on the basis of          

Options          

 opportunity costs      

 the law of diminishing returns          

 economies of scale    

 the labor theory of value

Question No.  26         Marks - 10

In terms of international trade, a small nation is best described as one which          

Options          

 is of limited geographical size           

 is land-locked nation without sea ports        

 doesn’t have many sellers     

 has small numbers of buyers and sellers

Question No.  27         Marks - 10

The nationally optimal tariff hopes to take advantage of the idea that         

Options          

 you can increase domestic producers’ well-being by keeping foreign competition minimal

 you can limit imports and extract low import prices from  foreign suppliers if you are a major world buyer          

 you can gain optimal tariff revenues for public purposes by taxing foreign imports

 you can charge optimal (minimal) tariffs and encourage good will from trade partners, leading to tariff-free exports for domestic producers and workers

Question No.  28         Marks - 10

“When a country exports a commodity produced with intensive use of its abundant factor, that factor’s returns will rise.” This statement is           

Options          

 The Hecksher-Ohlin theory   

 the Stolper-Samuelson Theorem       

 The Leontief paradox           

 the modern trade theory

Question No.  29         Marks - 10

“In tests run in the late 1940s, it was discovered that the U.S. was actually exporting labor-intensive goods and importing capital-intensive goods.” This statement is           

Options          

 The Hecksher-Ohlin theory   

 the Stolper-Samuelson Theorem       

 The Leontief paradox           

 the modern trade theory

Question No.  30         Marks - 10

Which of the following statements is correct?          

Options          

 Real GDP is the total market value of the final goods and services produced in America for sale in a year valued in the prices of 1992.     

 Your buying stock in the stock market is an example of investment spending        

 Potential Real GDP is always greater than Equilibrium       

 Real GDP

Question No.  31         Marks - 10

The period of the business cycle in which real GDP is increasing is called the:        

Options          

 expansion      

 peak   

 recession        

 trough

Question No.  32         Marks - 10

Assume that, in the population, 95 million people worked for pay last week, 5 million people did not work for pay but had been seeking a job, 5 million people did not work for pay and had not been seeking a job for the past several months, and 45 million were under age 16.  The unemployment rate, given these numbers, is:       

Options          

 5%     

 8%     

 10%   

 20%

Question No.  33         Marks - 10

A type of unemployment in which workers are in-between jobs or are searching for new and better jobs is called _______ unemployment:       

Options          

 frictional        

 cyclical          

 structural       

 turnover 

Question No.  34         Marks - 10

Consider three consumer goods: 100 of Good A, 100 of Good B, and 100 of Good C.  In the base year, Good A sold at a price of $1, Good B sold at a price of $1, and Good C sold at a price of $1.  In the current year, Good A sold at a price of $3, Good B sold at a price of $5, and Good C sold at a price of $10.  The Consumer Price Index (CPI) for the current year is:  

Options          

 100    

 300    

 500    

 600

Question No.  35         Marks - 10

Which of the following is a "loser" from unexpected inflation?       

Options          

 workers with COLAs           

 the middle class        

 people who own Treasury Bills         

 people who own homes and have fixed-rate mortgages       

Question No.  36         Marks - 10

If the nominal interest rate on a checking account is 2% and the inflation rate is 3% this year, the real interest rate is:           

Options          

 5%     

 25      

 2/3%  

 –1%

Question No.  37         Marks - 10

Which of the following would cause the demand curve for automobiles to shift to the left?          

Options          

 an increase in the price of the automobiles   

 an increase in the interest rate paid to borrow money to pay for the automobile     

 an increase in buyers´ incomes          

 an increase in the cost of production of automobiles

Question No.  38         Marks - 10

Suppose it is announced that industry analysts are predicting that decreased oil supplies from Iraq will cause gasoline prices to rise, beginning next month.  In the current week, the announcement would:        

Options          

 shift the supply of gasoline right      

 shift the demand for gasoline right   

 shift the demand for gasoline left     

 have no effect on the demand or supply of gasoline

Question No.  39         Marks - 10

"At the price of $500, tickets for the Super Bowl are expensive.  Yet, the are long lines of people who wish to buy them.  Many people who desire tickets will not be able to find them." From this quote, we know that the price of Super Bowl tickets must be:  

Options          

 below equilibrium     

 above equilibrium      

 equal to equilibrium  

 None of the above

Question No.  40         Marks - 10

Assume that the market for computers begins in equilibrium.  Then, there is a decrease in a price of Pentium processors used in the production of computers.  When the new equilibrium is reached,    

Options          

 the price and quantity of computers will both have risen     

 the price and quantity of computers will both have fallen   

 the price of computers will have risen and the quantity will have fallen      

 the price of computers will have fallen and the quantity will have risen      

  Answers :-

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