EC2008

Question 1

What factors influence trade patters ?

Answer 1

distance, cultural affinity, and trade agreemets

Question 2

What is the gravity model?

Answer 2

The gravity model is a mathematical model that predicts and explain trade relationships

Question 3

What can impact on the volume and nature of international trade

Answer 3

government policies such as: tariffs, quotas, and trade agreements

Question 4

what does international trade focus on?

Answer 4

the exchange of goods nad sevices between countries

Question 5

What does international finance focus on?

Answer 5

financial transactions, monetary exchange and investments

Question 6

what is the Ricardian model

Answer 6

it examines the difference in the productivity of labour [due to differences in technology] between countries

Question 7

what is the specific factors model?

Answer 7

Also known as the Heckscher-ohlin model, it examines difference in labour, labour skill, physical capital land or other factors of PRODUCTION between countries

Question 8

how is comparative advantage defined?

Answer 8

it is defined by comparing the opportunity cost across countries

Question 9

what are the key concepts in the definition of the Ricardian model

Answer 9

Comparative advantage and opportunity cost

Question 10

what is the production possibility frontier [PPf]

Answer 10

THe PPF of an economy shows the maximum amount of goods that can be produced for a fixed amount of resources

Question 11

what are relative wages

Answer 11

they are the wages of the home country relative to the wages in the foreign country

Question 12

what is economies of scale

Answer 12

it is the cost advantge that come from producing on a larger scale

Question 13

two types of economies of scale

Answer 13

internal and external

Question 14

what is interna economies of scale

Answer 14

when the cost per unit of output depends on the size of the firm

Question 15

what is external economies of scale

Answer 15

when the cost per unit of output depends on the size of the industrywh

Question 16

what are the different forms of external economies of scale

Answer 16

knowledge spillover
specialised supplies
labour pooling

Question 17

what is the learning curve

Answer 17

it is a graphical representaion of dyanamic increasing returns to scale

Question 18

what can the learning curve justify

Answer 18

protectionism

Question 19

what is dumping

Answer 19

it is the practice of charging a lower price for exported goods than for goods sold
domestically

Question 20

what is dumping an example of

Answer 20

price discrimination

Question 21

when can price discrimination and dumping occur

Answer 21

• imperfect competition exist
  market are segmented so that goods are not easily bought in one market and resold in another

Question 22

what do movements in factors of production include?

Answer 22

• labour
• the transfer of financial assets through international borrowing and lending
• transactions of multinational corporations involving direct ownership of foreign firms

Question 23

what is free trade

Answer 23

refers to the exchange of goods and services between countries without the imposition of barriers such as tariffs, quotas, or other restrictions.

Question 24

what does the Ricardo model analyse

Answer 24

it analyses how international trade relates to labour productivity

Question 25

how many factores does the heckscher-ohlin model have?

Answer 25

two factors

Question 26

what is the terms of trade

Answer 26

it refers to the price of exports relative to the price of imports

Question 27

what is usually biased?

Answer 27

growth

Question 28

what is export biased growth?

Answer 28

it is the growth that expands a country's production possibilities disproportionately in that country's export sector

Question 29

what is the import-biased growth?

Answer 29

it is the growth that expands a country's production possibilities disproportionately in that country's import sector

Question 29

export-biased growth

Answer 29

reduced a country's terms of trade, reducing its welfare and increasing the welfare of foreign contries

Question 29

what is a tariff

Answer 29

it is a tax levied when a good is imported

Question 30

import biased growth

Answer 30

it increases a country's terms of trade, increasing its welfare and decreasing the welfare of foreign contries

Question 31

what are the types of tariffs

Answer 31

-specific tariff - ad valorem tariff

Question 32

what is an import demand curve?

Answer 32

it is the difference between the quantity that home consumers demand minus the quantity that home consumers supply at each price

Question 33

what is a export supply curve?

Answer 33

it is the difference between the quantity that foreign producers supply minus the quantity that foreign consumers demand at each price

Question 34

what is consumer surplus?

Answer 34

it measures the amount that consumers gain from purchases by computing the difference in the price actually paid and their willingness to pay for each unit consumed

Question 35

what is producer surplus

Answer 35

measures the amount that producers gain from sales by computing the difference in the price received from the minimum price at which they are willing to sell

Question 36

what is a specific subsidy

Answer 36

it is a payment per unit exported

Question 37

what is an ad valorem subsidy?

Answer 37

it is a payment as a proportion of the value exported

Question 38

what is an import quota

Answer 38

it is a restriction on the quantity of a good that may be imported

Question 39

what do we call the revenue from selling imports at high prices which will be given to quota license holders

Answer 39

quota rents

Question 40

what is a voluntary export restraint

Answer 40

it works like an import quota except that the quota is imposed by the exporting country rather than the importing country

Question 41

what is local content requirement

Answer 41

it is a regulation that requires a specified fraction of a final good to be produced domestically

Question 42

what are export subsidies

Answer 42

a subsidized loan to exporters

Question 43

what is govermnet procurement

Answer 43

they are government agencies that are obligated to purchase from home suppliers, even when they charge higher prices compared to foreign suppliers

Question 44

what are Bureaucratic regulations?

Answer 44

safety, health, quality, or customs regulations can act as a form of protection and trade restriction

Question 45

what does free trade allow firms or industry to take advantage of?

Answer 45

economies of scale

Question 46

what does free trade provide?

Answer 46

competition and opportunities for innovation

Question 47

how does world trade organization negotiations address trade restricitons?

Answer 47

in three ways 1) Reducing tariff rates 2) binding tariff rates 3) eliminating non-tariff barries

Question 48

what agreements are based on the WTO

Answer 48

- general agreement on tariffs and trade - general agreement o tariffs and services - agreement on trade-related aspects of intellectual property

Question 49

what is the dispute settlement procedure?

Answer 49

a formal procedure where countries in a trade dispute can bring their case to a panel of WTO experts to rule upon

Question 50

what are preferential trading agreemetns

Answer 50

they are trade agreement between countries in which they lower tariffs for each other but not for the rest of the world

Question 51

what are the two types of preferential trading agreements in which tariff rates are set at or near zero

Answer 51

---a free trade area- an agreement that allows free trade among members, but each member can have its own trade policy towards non-member countries --- a custom union - an agreement that allows free trade among member and require a common external trade policy towards non-member countries