Student Number: (enter on the line below)
Student Name: (enter on the line below)
INTERNATIONAL TRADE AND ENTERPRISE
Trimester 1 2021
TIME ALLOWED: 4.5 hours
All answers must be submitted within this time frame. Late submissions are not accepted.
Assessment Weight: 50 total marks
• All questions must be answered by using the answer boxes provided in this paper.
• Completed answers must be submitted to Blackboard by the published due date and time.
Submission instructions are at the end of this paper.
This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit
Question 1 (7 marks)
i. The Gravity Model is used to explain trade flows. Define the gravity model. Specify the variables employed. Use the Gravity Model to explain recent increases in North East Asian trade – and employ relevant examples. (3 marks)
ANSWER: ** Answer box will enlarge as you type
ii. In the 19th Century British trading patterns were countries from distant locations such as North America, Latin America, Africa and Asia. Today, most British trade patterns are European countries. Examine the causes of the British changing trade pattern with reference to the Gravity Model.
Consider: 18th century trade patterns, relationship of UK with the Commonwealth countries, importation of raw materials and export of finished goods, Brexit and preferential treatment for UK exports to commonwealth countries. (4 marks)
Question 2 (7 marks)
“A nation’s production capacity is explained by the PPF and the differences give rise to trade.” Define a PPF. Describe the issues of ‘trade – off’ of production. (4 marks)
In developing your explanation consider the following: “…a nations terms of trade and welfare is determined by price and a nation’s volume of exports and imports.”
Define “Terms of Trade”. Explain whether it is negative or positive which increases national welfare. (3 marks)
Question 3 (7 marks)
Instruments of Trade Policy
Define using examples:
i. Specific tariffs. (2 marks)
ii. Ad valorem tariffs. (2 marks)
iii. Compound tariffs. (2 marks)
Plus one mark for a relevant example
Question 4 (7 marks)
Controversies in Trade Policy
i. The U.S. is probably the most open international market among the industrialized countries. What then does the U.S. have to gain by joining the WTO? (2 marks)
ii. “Infant industry protection” is a key solution for the growth of industrialization of developing countries. Discuss tariff process used, bases for financial charge, and allocation difficulties resulting, use examples. (3 marks)
iii. What are the benefits/difficulties with the “infant industry” argument? Give relevant examples. (2 marks)
Question 5 (11 marks)
Different market structures
1. Assume that you have been hired as a market entry consultant to advise an American bank which wants to enter into the Australian banking industry. This bank has a number of different services including corporate, investment banking, agricultural and retail banking services.
Given the top 4 banks in Australia control 80% of the market what issues with respect to oligopolistic market structure compared to other market structures would you discuss?
Describe all four of the market structures and how each one may or may not be conducive to entry of a new bank into the Australian market. (4 marks)
2. You decide to advise your client to start a business focusing on one of its specialty services. In other words within a monopolistic market structure.
What would you say to your client with respect to market entry and the prospects of growing the business?
In answering this question, explain why monopolistic structure is best entry strategy, which one of the specialty services should the bank focus on, importance of product differentiation, opportunity to capture super profits. (7 marks)
Question 6 (11 marks)
Absolute and Comparative Advantage
India can produce 100 units of rice and 300 hundred units of wheat using 1 unit of labour. However, Nepal uses 1 unit of labour to produce 20 units of rice and 20 units of wheat. Use this information to answer the following questions.
a. Define absolute advantage and say which country has absolute advantage in the production of rice and wheat? Justify your answer. (2 marks)
b. Define comparative advantage and use the matrix below to show which country has a comparative advantage in rice and wheat production. Show calculations of comparative advantages/opportunity costs. (9 marks)
Wheat 300 20
Rice 100 20
END OF SUPPLEMENTARY ASSESSMENT
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