178.358: International Trade in Agri-food Products Assignment 1 Instructions : This assignment…

178.358: International Trade in Agri-food Products Assignment 1 Instructions : This assignment…

178.358: International Trade in Agri-food Products

Assignment 1

Instructions: This assignment makes up 20% of your course grade. The assignment consists of three (3) questions of equal value (20 marks each question). Please answer all three questions. Marks obtained in the assignment will depend on the quality of your answer. There is no page limit but your answers should be relevant to the questions being asked. Please submit your assignment via stream by the due date.

Question 1(Gains from trade)

Suppose that the curves below represent the transformation or production possibilities for Argentina and Brazil.

0 Qautos 0 Qautos

Argentina Brazil

  1. Explain how these curves reflect increasing rather than constant cost conditions. Why is this likely to occur in the real world?

  2. Why is the barter exchange rate between wheat and autos steeper for Argentina than for Brazil? How does this reflect different relative opportunity costs in the two countries?

  3. Draw a new terms-of-trade or barter exchange rate line for each country that would represent the potential for mutually beneficial trade. Why must this line have the same slope for both countries?

  4. Explain why this terms-of-trade line leads each country to specialize only incompletely according to its comparative advantage. Draw potential trade triangles for each country to illustrate the potential gains from trade.

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    Question 2(Tariffs vs Quotas)

    Suppose a country wants to protect its producers from foreign competition and is trying to decide whether to impose a tariff or an import quota.

  1. How are the effects of a tariff (on prices, supply, demand, government revenue, quantity imported) similar to the effects of a quota and how are they different? Please illustrate with a graph.

  2. In what ways can tariffs be regarded as superior to quotas?

    Question 3(Export Subsidy)

  1. For the large country case, show on a suitable diagram the impact of imposition of an export subsidy on export volumes and the world price

  2. Show diagrammatically how a monopoly export marketing board can practice price discrimination between the domestic and foreign market.

    Submission Date: Until 19 April 2017

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178.358: International Trade in Agri-food Products Assignment 1 Instructions : This assignment…

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