Miami University Global Economics Discussion Questions

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ASSIGNMENT: 4 QUESTIONS
Exercise 1 Absolute and comparative advantages
Exercise 2 Tariff and quota
Exercise 3 Role of International Organizations and country impact
Exercise 4 Challenges and benefits from globalization
Exercise 1: Absolute and comparative advantages (25 points)
Use the information on labor productivities and amount of labor in each country stated the
following tables.
Table 1. Output per Hour Worked
UK
Wine
8 units
Wool
9 units
Italy
14 units
10 units
Germany
6 units
5 units
France
12 units
3 units
Select two countries of your choice to answer questions from a) to g).
Table 2. Please selected 2 countries from Table 1:
Page 2
Assessment Brief
Academic Year 2021-2022
Country 1 –
Country 2 –
Wine
Wool
Note that this Table should be replicated in your submission file, filled with the countries of
your choice.
a) Please complete Table 2, selecting 2 countries of your choice from Table 1. Considering
Table 1, which of the selected countries has an absolute advantage in wine and in wool?
Why? (3 points)
b) According to the absolute advantage theory, in which goods should country 1 and 2
specialize? (3 points)
c) What is the opportunity cost of wool and wine in the country of choice 1? In country of
choice 2? (3 points)
d) According to the comparative advantage theory, which country has a comparative
advantage in wool? In wine? Explain your answer. (3 points)
e) What are the upper and lower bounds for the trade price of wine? And of wool? (3 points)
f) Discuss the gains from specialization in trade for the selected countries (3 points).
g) Draw a hypothetical PPC for selected country (1 or 2) and label its slope. Suppose that
the country follows its comparative advantage in deciding where to produce on its PPC.
Label its production point. Draw a trade line (CPC) showing how the country can gain
from trade. (7 points)
Exercise 2: Tariff and quota (25 points)
a) Explain the differences between tariff and quota, discussing the effects of a tariff and
of a quota on the surplus of the actors involved (10 points).
b) Assume Home is a small country and thus unable to influence the world price. Its
demand and supply schedules for washing machines are shown in Table below.
Price of a washing machine (€)
500
400
300
200
100
0
Quantity Demanded Quantity Supplied
0
50
10
40
20
30
30
20
40
10
50
0
i.
Draw the graphs of demand and supply and determine the equilibrium price
and quantity (3 points).
Page 3
Assessment Brief
Academic Year 2021-2022
ii. Suppose Home imports washing machines at a world price of 100€ each. How
many washing machines will be produced, consumed, and imported? (3
points).
c) To protect its producers from foreign competition, suppose that Home government
levies a specific tariff of 100 € on imported washing machines. Find and show graphically
the domestic price of washing machines in Home, the quantity of washing machines
supplied by Home producers, the quantity of washing machines demanded by Home
consumers, and the amount of import after the tariff is imposed. Explain how the domestic
price and quantities changed as compared to the no-tariff situation, as well as the change
of surplus for the actors compared to the situation in b). (9 points)
Exercise 3: Role of International Organizations and country impact (25 points)
Explain the role of IMF / WTO / World Bank, choosing only one of the aforementioned
institutions (10 points).
Select a country of your choice and discuss how the chosen international organization has
impacted or is impacting on the country and its policies and socio-economic framework (past
or present), bringing specific and documented facts and examples, i.e. on trade, loans,
development assistance, conditionality, etc. (15 points).
Words count: 300-500 words
Exercise 4: Challenges and benefits from globalization (25 points)
Please discuss what is globalization (5 points).
Please discuss two challenges, or one challenge and one benefit, from globalization (20
point).
Words count: 300-500 words

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