1UNIVERSITY OF SOUTHAMPTON ECON6016W1 SEMESTER 2 EXAMINATIONS 2018-19 ECON6016 International Trade Theory and Policy Duration: 120 mins (2 HRS) This paper contains 6 questions Answer THREE questions in Section A and ALL questions in Section B. Section A carries 3/5 of the total marks for the exam paper and you should aim to spend about 70 minutes on it. Section B carries 2/5 of the total marks for the exam paper and you should aim to spend about 50 minutes on it. An outline marking scheme is shown in brackets to the right of each question. Only University approved calculators may be used. A foreign language direct ‘Word to Word’ translation dictionary (paper version) ONLY is permitted. Provided it contains no notes, additions or annotations. Copyright 2019 v01 c© University of Southampton Page 1 of 4 2 ECON6016W1 Section A 1. Consider the Ricardian model with two countries, Home and For- eign, and two goods: wine and cheese. Suppose that Foreign’s unit labour requirement in wine is five times that of Home’s unit labour requirement in wine, whereas Foreign’s unit labour requirement in cheese is three times that of Home’s unit labour requirement in cheese. Moreover, Home’s unit labour requirement in wine is equal to that for cheese. Using the necessary graphs, what can you say about absolute and comparative advantage of Home? If, after trade, both goods are being produced, what can you say about the relative price of wine Pwine/Pcheese? What about the relative wage, w/w ∗, where w is Home’s wage and w∗ is Foreign’s wage. [20] 2. Consider a simple model of international labour mobility. There are two countries, one good Q and two factors of production, land T and labour L. Suppose that in country A the real wage is lower than in country B. Suppose now that labour movement is free between the two countries. Using the necessary graphs, explain what happens to the real wage of country A, its real rental rate of land, its amount of labour and the world production of good Q. Is there any empirical evidence supporting the model’s prediction on the effect of labour mobility on the real wage in country A? [20] 3. Consider the Heckscher-Ohlin model. Suppose the prices of Cloth and Food are constant. Use the Edgeworth Box to analyse the effects of an increase in the economy’s endowment of capital on the factor-price ratio, the capital-labour ratio, the input allocation and the production in the two sectors. [20] 4. Explain what is intra-industry and inter-industry trade. How can we explain the emergence of each type of trade? Can we have both Copyright 2019 v01 c© University of Southampton Page 2 of 4 3 ECON6016W1 types simultaneously in a country and why? What is approximately the share of intra-industry trade with respect to world trade? [20] Section B 1. Consider a model with two countries, Home and Foreign. The fol- lowing table summarises the hours of labour needed in each country to produce Food (F ) and Cloth (C). Home Foreign Food 5 10 Cloth 10 5 (a) What is the opportunity cost of producing Cloth in terms of Food in each country? Which country has a comparative advantage in the production of Food? [5] (b) Let PF and PC be the prices of Food and Cloth, respectively. What are the autarkic price ratios PFPC in the two countries? Draw the Production Possibility Frontier for each country, putting Cloth on the horizontal axis. Determine a range for the world price ratio PFPC that will prevail once these countries open their economies to trade. If the world price PFPC is the lowest possible, what can you say about the production of Home and Foreign? [5] (c) Suppose that both countries are endowed with 100 units of labour. Further assume that the tastes are such that goods are consumed in fixed proportions. In particular, the Foreign country likes to consume 10 units of Food for every 5 units of Cloth (at any prices), while Home likes to consume 5 units of Food for every 10 units of Cloth (at any prices). Draw the indif- ference curves for each country, putting Cloth in the horizontal axis. Draw the production possibilities curves for Home and the Foreign country. Determine the production and consumption of Copyright 2019 v01 c© University of Southampton TURN OVER Page 3 of 4 4 ECON6016W1 each commodity under autarky (before trade). If there is free trade and the world price is PFPC = 1, what is the world supply and world demand for Cloth? [10] 2. Consider the Heckscher - Ohlin model. There are two factors of production, labour L with price w and capital K with price r. There are two goods, computers C, whose production is capital intensive and shoes S, whose production is labour intensive. The labour demand for computer production is given by LC , whereas for shoes it is LS. Similarly, capital demand for shoe production is KS and for computer production is KC . (a) Draw a graph showing the relationship between the factor price ratio wr (put it on the vertical axis) and the relative demand for labour in the shoe production, LSKS , and in the computer production, LCKC . Draw the total relative supply L K in the same graph. [5] (b) Show that, in equilibrium, the relative demand for labour LC+LSKC+KS is equal to a weighted average of the relative demands for the two industries, LC + LS KC +KS = α LC KC + β LS KS . What are the weights α and β? Draw the relative demand for labour in the graph and find the autarky (before trade) equilib- rium factor price ratio wr . [5] (c) Suppose that the country is capital abundant. What will it export if trade is allowed? What happens to PCPS , QC QS and to the labour ratios LCL and LS L ? [5] (d) Show in the graph how the new equilibrium factor price ratio wr changes. Does it increase or decrease? [5] Copyright 2019 v01 c© University of Southampton Page 4 of 4 END OF PAPER Social Sciences Examination Feedback 2018/2019 Module Code & Title: ECON6016 International Trade Module Coordinator: Chiara Forlati Mean Exam Score: 50% Percentage distribution across class marks: UG Modules 1 st (70% +) 2.1 (60-69%) 2.2 (50-59%) 3rd (40-49%) Fail (25-39%) Uncompensatable Fail (<25%) PGT Modules 70% + 19.6% 60-69% 15.7% 50-59% 9.8 <50% 54.9% Overall strengths of candidates’ answers: Some of the candidates demonstrate to have studied and understood very well the class material. This is somehow reassuring because it confirms that with the right amount of effort it was possible to pass the exam and may be even to reach a first. Overall weaknesses of candidates’ answers: Some of the candidates seem to have struggled with understanding even the most key features of the main models discussed in class (especially the ones of the Heckscher-Ohlin model). At the same time, some of the candidates seem to not being able to organise and generalise class material by sometimes getting confused about the conclusions drawn in different contexts. Pattern of question choice: In Section A, candidates have to choose to answer 3 questions out of 4. The choice was not evenly distributed. 61% of the candidates chose Q1, 51% Q2, 43% Q3 and 94% Q4. Section B questions were all compulsory. Issues that arose with particular questions: Section A Q3: The average grade Q3 was the lowest of Section A: 10.3 points out 20 points. Candidates did not understand that factor prices and factors share were not changing since the relative price of the goods was given. This happens even if it was apparent in the graph describing Edgeworth Box discussed in class. Section B: Many of the candidates answer properly point a) and b) of Q1, but not point c). This is some somehow expected since point c) was the challenging one. A similar pattern applies to Q2. Many of the candidates managed to answer well point a), b) and c) but not d). Further comments not covered above: N/A Discipline vetting completed By (Name): E Mentzakis Date: 26/06/2019 Social Sciences Examination Feedback 2018/2019 Module Code & Title: ECON6016 International Trade Module Coordinator: Chiara Forlati Mean Exam Score: 50% Percentage distribution across class marks: UG Modules 1 st (70% +) 2.1 (60-69%) 2.2 (50-59%) 3rd (40-49%) Fail (25-39%) Uncompensatable Fail (<25%) PGT Modules 70% + 19.6% 60-69% 15.7% 50-59% 9.8 <50% 54.9% Overall strengths of candidates’ answers: Some of the candidates demonstrate to have studied and understood very well the class material. This is somehow reassuring because it confirms that with the right amount of effort it was possible to pass the exam and may be even to reach a first. Overall weaknesses of candidates’ answers: Some of the candidates seem to have struggled with understanding even the most key features of the main models discussed in class (especially the ones of the Heckscher-Ohlin model). At the same time, some of the candidates seem to not being able to organise and generalise class material by sometimes getting confused about the conclusions drawn in different contexts. Pattern of question choice: In Section A, candidates have to choose to answer 3 questions out of 4. The choice was not evenly distributed. 61% of the candidates chose Q1, 51% Q2, 43% Q3 and 94% Q4. Section B questions were all compulsory. Issues that arose with particular questions: Section A Q3: The average grade Q3 was the lowest of Section A: 10.3 points out 20 points. Candidates did not understand that factor prices and factors share were not changing since the relative price of the goods was given. This happens even if it was apparent in the graph describing Edgeworth Box discussed in class. Section B: Many of the candidates answer properly point a) and b) of Q1, but not point c). This is some somehow expected since point c) was the challenging one. A similar pattern applies to Q2. Many of the candidates managed to answer well point a), b) and c) but not d). Further comments not covered above: N/A Discipline vetting completed By (Name): E Mentzakis Date: 26/06/2019
欢迎咨询51作业君
