SUMMARY OF INTERNATIONAL ECONOMICS

SEMESTER AUG – NOV 2019

QUESTION ONE (1)

a) States the basic rationale for economies-of-scale models with international trade.
b) Distinguish economies of scale from increasing returns to scale.

QUESTION TWO (2)

a) Discuss the winners and losers in the short run for free trade

QUESTION THREE (3)

a) Learn the basic assumptions of the Heckscher-Ohlin (H-O) model, especially factor
intensity within industries and factor abundancy within countries.
b) Identify the four major theorems in the H-O model.

QUESTION FOUR (4)

a) Identify the basic features of a monopolistic competition model

b) Identify the basic features of a monopolistic competition model

QUESTION FIVE (5)

a) Define Dumping
b) State THREE (3) reasons the exist of external economies
c) State TWO (2) differences between inter-industry trade and intra-industry
trade.
d) State THREE (3) empirical evidence that support the Heckscher-Ohlin Model
e) Define the following terms
1. Import Tariffs
2. Export subsidies
3. Export-biased growth
4. Import-biased growth
QUESTION SIX (6)
a) Discuss the effects of a specific tariff on prices in both countries and the
quantity traded.
b) Discuss the effects of an import quota on prices in both countries and the
quantity traded.
c) Discuss the pros and cons of applying tariffs versus quotas.

QUESTION SEVEN (7)

a) Discuss how and why lobbying is used to influence the policy decisions of a
government.
b) Discuss how the Uruguay Round of the General Agreement on Tariffs and
Trade (GATT) greatly expanded the coverage of trade liberalization efforts to
previously uncovered sectors.
c) Describe the basic principles underpinning the GATT.