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Governments in Developed Countries Provide Extensive Support on Agricultural Producers

In: Business and Management

Submitted By shuyi
Words 835
Pages 4
LA TROBE UNIVERSITY

SCHOOL OF ECONOMICS AND FINANCE

SEMESTER ONE 2009 MID-SEMESTER EXAMINATION

ECO2IBE: INTERNATIONAL BUSINESS ENVIROMENT

Time Allowed: ONE (1) hour

Reading time: 15 minutes

This examination contributes 20 per cent of the assessment

Pens, pencils and erasers (rubbers), and unmarked non-electronic English dictionaries are allowed. Students from non-English speaking backgrounds can bring unmarked non-electronic translation dictionaries

Candidates must answer ALL questions

Q1 (10 marks), Q2 (10 marks)

This paper has THREE pages, including this one.

Question 1 – very brief answers please

1) Globalisation refers to the process of moving towards a more integrated and inter-dependent world economy. What are two main drivers of globalisation? (1 mark)

2) Suppose that prior to NAFTA the USA produced its own textiles at a higher cost than Mexico, but imports them from Mexico after NAFTA. Is the USA worse off or better off? Is this a case of trade diversion or trade creation? (1 mark)

3) Suppose the USA had 20% duty on all imported textiles before NAFTA and it imported its textiles from China. After NAFTA, it imports from Mexico. Is there any trade diversion? (1 mark)

4) The USA has a highly skilled labour force and has lots of capital. China has a lot of cheap, unskilled labour compared with the USA. A fellow student, David, tells you that according to the Ricardian model of comparative advantage based on productivity/technology differences the USA should produce and export jet aircraft, while China should produce and export textiles. Another student, Chris, tells you that the statement is based on the Heckscher-Ohlin model based on relative factor endowments, rather than the Ricardo’s model. Who is right, David or Chris? (1 mark)

5) Photocopiers were first developed in the USA

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