Question 1

Answer the following questions on International Trade.

a) Why do countries place restrictions on international trade?

b) Suppose the United States imposes a quota on copper imports. Explain who would benefit from the tariff and who would be hurt by the tariff and why.

c) Why does the United States not have an absolute advantage in coffee?

Question 2

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.

a) Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week.

Question 3

If trade increases world GDP by 1% per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss.

Hint: To answer this question, here are steps you may want to consider.

1. Go to the World Development Indicators (online) published by the World Bank.

2. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars.

3. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lanka's GDP.

Question 4

Answer the following questions from Globalization and Protectionism.

a) Who does protectionism protect? What does it protect them from?

b) How does protectionism affect the price of the protected good in the domestic market?

c) What is dumping? Why does prohibiting it often work better in theory than in practice?

d) Why is trade a good thing if some people lose?