According to neoclassical economic theory, as long as trade is voluntary, both trading partners benefit as they can capitalize on their comparative advantages in production. Indeed since 1980s, all developed countries and international organizations such as IMF, World Bank and WTO have been promoting free trade; yet most wealthy developed countries practice protectionism themselves. Discuss..
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- If countries specialize according to their absolute advantage then the Ricardian model statesthata. the. trade is beneficial for all trade partners.b. trade is a stupid idea anyway.c.it is ambiguous whether trade is beneficial for all trade partners.d. trade is only beneficial for those who have absolute advantage as wellIn che mid-1980s several of South Africa's maintrading partners imposed trade sanctions on SouthAfrica in an effort to bring an end to the then-prevailing policy of apartheid.South Africa mainly relied on the exports ofprimary commodities like gold, iron and other preciousmetals, while importing mainly capital goods.This almost instantly led to South Africa expe-riencing a shortage of capital goods, resulting insubdued economic growth. 31. In what did South Africa have a comparativeadvantage? 32.a.Draw a graph to illustrate production,consumption and trade in South Africabefore the imposition of trade sanctions.b.Was South Africa consuming inside, on oroutside its PPP? Explian your answer.c.Draw a graph to show the effects of tradesanctions on consumption and productionin South Africa.d. Did trade sanctrions change any opportunitycoSts in South Africa? If so, did theopportunity cost of everything increase?Did the opportunity cost of any itemsdecrease? Illustrate your answer…Using the one factor Ricardian model concept and the unit labor requirements information in the table below, determine d) In what commodity production, foreign has a comparative advantage.Explain.e) Which country has an absolute advantage. Explainf) If PC is the price of Cheese and PW is the price of Wine, and PC = PW, thenWhat commodities will domestic specialize in?g) If PC is the price of Cheese and PW is the price of Wine, and PC = PW, thenwhat commodities will foreign specialize in?h) Using the comparative advantage information above, determine the commodity thatexported and imported by domestic and foreign respectively?i) If PC = PW or PC/PW = 1, what is the gain from trade obtaineddomestic and foreign if each country specializes inwhich production has a comparative advantage? Explain.j) If if PC = PW = $9, what is the wage relative to trade.Which country's workforce benefits from the trade?
- Why is a production possibility curve concave explain?Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a sheet of paper and then add a foreign county as a third agent. Draw a rough sketch of the flows of imports, exports, and the payment for each on your diagram.Should economists be in favour of globalisation? Discuss with respect to at least threeof the following areas:a) Comparative advantage and gains from tradeb) Trade and growthc) Migrationd) Winners and losers from globalisatione) Rodrik’s Policy Trile
- Can you confirm that I am correct with these positive and normative statements: Positive statement: When oil production slows in Texas, employment and tax revenues decline, and budget cuts at the state and local levels often follow. (Craymer has estimated that the state loses $85 million per year for every $1 decrease in oil prices.) Normative statement:If Russia agrees to production cuts and COVID-19 goes dormant in the hot summer months, as some experts expect, Texas’ coffers will have time to recover before lawmakers convene in 2021 to write a new budget. Or would this be a normative statement:Experts said Texas is better positioned to handle an oil price collapse today thanks to a diversified economy. The last collapse in oil prices, in 2014, also forced the industry to cut costs and otherwise become more efficient. But University of Texas at Austin energy resources professor Michael Webber said COVID-19 throws an unprecedented economic variable into the mix.Using a production possibilities frontier (PPF) diagram, determine how does a country’s PPFchange in response to the events described below.Make sure to explicitly indicate what sectors you are representing, and what sort ofassumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latterfollows from your assumptions on the factor intensity of the sector you are representing. a) Reducing skilled migration into the countryb) Imposing import taxes (tariffs) on intermediate inputsc) Increasing the expenditure on research and developmentd) An increase in the retirement age (providing greater flexibility in labour markets)e) The effects of a natural disaster.Using a production possibilities frontier (PPF) diagram, determine how does the PPF changein response to the following events:Make sure to explicitly indicate what sectors you are representing, and what sort ofassumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latterfollows from your assumptions on the factor intensity of the sector you are representing.a) Increasing skilled migration into the countryb) Imposing taxes on manufacturing (hint: define a two-sector producing economy,manufacturing and services).c) Decreasing the expenditure on research and developmentd) Implementation of easier rules for foreign investmente) The effects of a pandemic
- Using a production possibilities frontier (PPF) diagram, determine how does the PPF changein response to the following events:Make sure to explicitly indicate what sectors you are representing, and what sort ofassumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latterfollows from your assumptions on the factor intensity of the sector you are representing.a) Increasing skilled migration into the countryb) Imposing taxes on manufacturing (hint: define a two-sector producing economy,manufacturing and services).c) Decreasing the expenditure on research and developmentd) Implementation of easier rules for foreign investmente) The effects of a pandemic the Sub-parts to be solved. d and eUsing a production possibilities frontier (PPF) diagram, determine how does the PPF changein response to the events describe below.Make sure to explicitly indicate what sectors you are representing, and what sort ofassumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latterfollows from your assumptions on the factor intensity of the sector you are representing.a) A relaxation of policies allowing more foreign direct investment into the country.b) Increasing the minimum wage level.c) A decrease in expenditure on research and development.d) An increase in the retirement age.e) Government policies supporting the provision of services, without affectingtrue or false Economic models must mirror reality or they are of no value. When economists make normative statements, they are more likely to be acting as scientists. If a country's worker can produce 5 hamburgers per hour and 10 bags of fries per hour, then absent trade with other countries,the price for 1 bag of fries is 2 hamburgers. If trade benefits one country, it's trading partner must be worse off due to the price of trade. If an advanced country has an absolute advantage in the production of everything(relative to certain less developed countries), the advanced country will benefit if it eliminates trade with less developed countries and becomes self sufficient.