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ECT721S - ECONOMICS OF TRADE - 1ST OPP - NOV 2024 |
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nAm I BIA UnlVERSITY
OF SCIEnCE Ano TECHn OLOGY
FACULTYOF HEALTH,NATURALRESOURCESAND APPLIEDSCIENCES
SCHOOLOF AGRICULTUREAND NATURALRESOURCESSCIENCES
DEPARTMENTOF AGRICULTURALSCIENCESAND AGRIBUSINESS
QUALIFICATION:BACHELOROF SCIENCEIN AGRICULTURE(AGRIBUSINESSMANAGEMENT)
QUALIFICATION CODE: 07BAGA
LEVEL: 7
COURSECODE: ECT721S
COURSENAME: ECONOMICS OF TRADE
DATE: NOVEMBER 2024
PAPER1
DURATION: 3 HOURS
MARKS: 100
FIRSTOPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) PROF DAVID UCHEZUBA
MODERATOR: MR BEN HARASEB
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers.
PERMISSIBLEMATERIALS
1. Examination question paper
2. Answering book
THIS QUESTION PAPERCONSISTSOF 9 PAGES(Excluding this front page)
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SECTION 1 MULTIPLE-CHOICE QUESTIONS (20 MARKS)
Question 1
The source of gains from trade is
a. tariff revenue
b. self-sufficiency
c. autarky equilibrium
d. comparative advantage
(1 Marks)
Question 2
lzodian can produce 8 units of food per day or 12 units of clothing per day. Valentia can
produce 5 units of food per day or 10 units of clothing per day. Which of the following is
correct?
a. mutually beneficial trade is not possible
b. to maximize world production, lzodian should produce only food, Valentia should
produce only clothing, and they should trade
c. both countries should produce both goods and they should trade
d. to maximize world production, lzodian should produce only clothing, Valentia should
produce only food, and they should trade
(1 Mark)
Question 3
The world price is in equilibrium when
a. half of the individual countries' domestic prices are higher, and half of the individual
countries' domestic prices are lower
b. the desired level of total world exports of the good equals the desired level of total world
imports of the good
c. each country's exports of this good equal its import of this good
d. Supply and demand of goods and services are equal in the domestic economy
(1 Mark)
Question 4
Consumer surplus results when
a. the quantity demanded of a product equals the quantity supplied of that product.
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b. the quantity demand of a product is greater than the quantity supplied of that product.
c. a consumer buys a good for less money than he was willing to pay.
D. a consumer buys surplus food than he wants to buy
{1 Mark)
Question 5
5. The world price is in equilibrium when
a. half of the individual countries' domestic prices are higher, and half of the individual
countries' domestic prices are lower
b. the desired level of total world exports of the good equals the desired level of total world
imports of the good
c. each country's exports of this good equal its import of this good
d. Supply and demand of goods and services are equal in the domestic economy
{1 Mark)
Question 6
13. Producer surplus is the
a. excess supply which exists when the price is maintained above the world price
b. difference between the marginal benefit of a product and the marginal cost producers
incur in supplying the product
c. difference between the actual revenue a producer receives and the minimum sum they
would accept for a quantity of a good
d. excess supply which exists when the price is maintained below the world price
{1 Mark)
Question 7
International trade is based on the idea that:
a). Exports should exceed imports.
b). Imports should exceed Exports.
c). Resources are more mobile internationally than goods.
d). Resources are less mobile internationally than goods.
(1 Mark)
Question 8
Arguments for free trade are sometimes disregarded by politicians because:
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a). Maximising domestic efficiency is not considered important.
b). Maximising consumer welfare may not be a chief priority.
c). There are sound economic reasons for keeping one's economy isolated from other
economies.
d). Economists favour highly protected domestic markets.
(1 Mark)
Question 9
Which of the following can lead to gainful trade except
a). Consumer preferences
b). Relative prices
c). Opportunity cost
d). Diseconomies of scale
(1 Mark)
Question 10
If Namibia and Zambia have identical production possibility curves that are subject to
increasing opportunity costs:
a). Trade will depend on differences in the demand conditions.
b). Trade will depend on the economies of large-scale production.
c). Trade will depend on differences in exchange rates.
d). There will be no basis for gainful trade.
(1 Mark)
Question 11
The following exemplified the Mercantilist theory except
A. Wage restrain
B. Export restrain
C. Import prohibition
D Tariff levy
(1 Mark)
Question 12
A country can specialise in the production of commodities that they are capable and
efficient at producing and exchanging with other countries for its other needs. This is the
theory of
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A. Absolute advantage
B. Comparative advantage
C. Competitive advantage
D. None of the above
(1 Mark)
Question 13
Which of the following statements is incorrect? In an imperfectly competitive market, there
is
A. Price discrimination
B. Homogenous pricing
C. Market segmentation
D. Market failure
(1 Mark)
Question 14
The following are the benefits of specialization and division of labour, except,
A. Higher standard of living
B. High levels of efficiency
C. High opportunity cost
D. Increased world output
(1 Mark)
Question 15
A firm in country A dumps chicken into country B, what is the demand curve for this firm in
countries A and B?
A. The firm faces a downward demand curve in country A
B. The firm faces a downward demand curve in country B.
C. The firm faces a horizontal demand curve in country A.
D. The firm faces an upward demand curve in country B.
(1 Mark)
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Question 16
What is the meaning of "an invisible hand of the market''?
A. Market segmentation
B. Market equilibrium
C. Market Access
D. Market failure
(1 Mark)
Question 17
Prices for goods must reflect the market demand implies.
A. Market segmentation
B. Ceteris Paribus
C. Market equalization
D. Market equilibrium demand and supply
(1 Mark)
Question 18
Mr Jones imports a commodity from Japan into Namibia, at the port, he pays 21% of the
value of the goods. This implies Mr Jones paid.
A. An import tax
B. A custom duty
C. A specific tariff
D. An ad valorem tariff
(1 Mark)
Question 19
Ricardo's comparative advantage was based on the following assumptions, except,
A. Two countries, two goods, two factors
B. Two countries, two goods, one factor
C. Homogeneity of goods
D. Homogeneity of labour
{1 Mark)
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Question 20
Suppose an electronic sells for N$ 6000 per unit in the market, and the factor cost of
producing it is N$2000. What value did electronics add to the industry?
A. N$1000
B.N$4000
C. N$8000
D.N$12000
(1 mark)
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SECTION 2 ESSAY-TYPE QUESTIONS (80 MARKS)
Question 2 (20 Marks)
The domestic demand and domestic supply curves for fruit juice in a small, closed economy
are as follows:
Supply:P = 2Q8 + 2
Demand: P = -QD + 32
2.1 In this small, closed economy, calculate the value of
a) Consumer surplus (CS}for the fruit juice market
(1 Mark)
b) Producer surplus (PS}for the fruit juice market
(1 Mark)
2.2. Suppose that this small, closed economy is open to free trade and that the world
price is $10_per fruit juice.
a. With free trade, what is the quantity supplied by domestic producers? (1 Mark)
b. With free trade, what is the quantity demanded by domestic consumers? (1 Mark)
c. With free trade, how much fruit juice will the country import or export? (1 Mark)
d. Calculate the value of consumer surplus (CStrade)
(1 Mark)
e. Producer surplus (PStrade).
(1 Mark)
2.3. Suppose that the government imposes a tariff of $4 on each imported fruit juice, and
the world price is $10 per fruit juice.
a. What is the quantity supplied by domestic producers after the introduction of the
tariff?
(1 Mark)
b. What is the quantity demanded by domestic consumers after the introduction of the
tariff?
(1 Mark)
c. How much fruit juice will the country import or export after the introduction of the
tariff?
(1 Mark)
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d. Draw a graph and shade the areas of the consumer surplus (CStariff), the producer
surplus (PStariff), the total tariff revenue (TRtariff), and the deadweight loss (OWL)
after the introduction of tariffs.
(6 Marks)
2.4. After the introduction of the tariff, calculate the value of
a. Consumer surplus (CStariff).
(1 Mark)
b. Producer surplus (PStariff) for the fruit juice market.
(1 Mark)
c. Calculate the value of total tariff revenue (TR tariff).
(1 Mark)
d. Calculate the value of the deadweight loss (OWL).
(1 Mark)
Question 3 (20 Marks)
3.1. Both China and South Korea can produce cloths and wine which they can export to
the world market. Use the information in the table 1 below to answer the following
question.
Table 1
Countries
Cloths (kg)
Wine (litre)
China
120
80
South Korea
30
60
3.1.1. What is the opportunity cost of one litre of wine in South Korea?
(1 Mark)
3.1.2. What is the opportunity cost of one litre of wine in China?
(1 mark)
3.1.3. According to the principle of absolute advantage what trade opportunity exists for
South Korea?
(1 Mark)
3.1.4. According to the principle of comparative advantage what trade opportunity exists for
China?
(1 Mark)
3.1.5. With Trade what is the maximum amount of cloth China will be willing to export to
South Korea in exchange for each litre of wine?
(1 Mark)
3.1.6. With Trade what is the maximum amount of wine South Korea will be willing to
export to China in exchange for each kg of cloth?
(1 Mark)
3.2. According to Adam Smith what are the factors that improve the terms of trade of a
country?
(8 Marks)
3.3. Give reasons why nations trade
(6 Marks)
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Question 4 {20 Marks)
4.1. Discussthe underlying assumptions of the following trade theorists
4.1.1 Adam Smith
4.1.2. David Ricardo
(5 Marks)
(5 Marks)
4.2.
4.2.1. Outline the critiques of Adam Smith's trade theory
4.2.3 Outline the critiques of David Ricardo's trade theory
(5 Marks)
(5 Marks)
Question 5 {20 Marks)
5.1. Distinguish between the following
5.1.1 Trade creation and trade diversion
5.1.2. Specific and ad valorem Tariff
5.1.3 Import and export biased growth
5.1.4. Custom union and common market
5.1.5. Intra-industrial and inter-industrial trade
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
5.2. What is the meaning of the following terms
5.2.1 Dumping
5.2.2. Rules of origin
5.2.3. Most favoured nation
5.2.4. Free trade area
5.2.5 Trade concession
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
END
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