International Trade — DU B.A. (Hons.) Economics Previous Year Question Papers

Choose the correct options : (a) Which of these is not an assumption in the Heckscher-Ohlin model: (i) Tastes are identical across countries (ii) Technologies are identical across countries (iii) Factors of production are perfectly mobile across countries (iv) Markets are perfectly competitive (b) A firm from the country Home buys more than 10 percent of a firm in another country, Foreign. A part of the firm's production process is transferred to the affiliate location. This activity is characterized as (i) Greenfield Foreign Direct Investment (FDI), Horizontal FDI (c) If a country's exports and imports within an industry are equal, the index of intra-industry trade of the given industry will be (iii) Infinite (iv) Cannot be determined. (d) The Rybczynski theorem argues that if the supply of.labour increases in a small economy, while prices of goods, and factors remain unchanged, then: (i) the output of all goods increases (ii) the output of all goods decreases (iii)I the output of the labour-int-ensive good increases, while that of the capital-intensive good decreases (iv) the output of the capital-intensive good increases, while that of the labour-intensive good decreases. (e) The world price of a commodity X. is $100. Imports of this commodity are levied a tariff of 20%. If produced domestically, inputs worth $60 need to be imported. A tariff of 10% is le.vi.ed on inputs. What is the effective rate of protection to domestic producers of X? Write brief answers: (I) Amazonica is a firm which engages in the production and export .of mobile handsets based in Campos. The trade cost of exporting mobile handsets to Indus be $ 0.5 per unit, and it exports 20,000 units to Indus. Altematively, Amazonica can set up a production facility in Indus for a fixed cost is $6000. Would it continue to export from Campos or set up a firm in. hdus`? (g) What is the magnification effect in the Stolper-Samuelson Theorem? ® Under what conditions does trade lead tQ,immiserizing growth? (i) What is an optimum tariff? Answer ahy tour qtle.stions. (a) Home is a small open egonomy with 600 workers and produces two commodities, food and cloth. Unit labour .requirement for ,producing.food is 1 worker-hour per unit of food, land unit' labour requirement for cloth is 3 worker-hours per unit of cloth. In th`e pre-trade world, it employs 300 workers in each of the two industries. With free trade, it faces world prices of Rs.10. per unit of food and Rs. 20 per unit of cloth. (i) What is the pre-trade consumption of food and cloth in Hbme? (ii) Suppose the pre-trade equilibrium wage is Rs. 8 per hour.Jwhat are the pre-trade prices of food and cloth in Home? (iii) When Home opens to free trade, under the normal assumptions of the Ricardian mo.del, what will it export and import? (iv) What is. Home's national income, preL and post-trade, measured in rupees? H`as the country. gained from trade? -