Exam (elaborations)
International Trade Exam January 2018 for Loughborough University
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ECC031 International Trade Exam January 2018 for Loughborough University
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INTERNATIONAL TRADE(17ECC031)
January 2018 3 Hours
Answer THREE questions in total.
All questions carry equal marks.
Calculators are not permitted.
1. (a) “Trade liberalisation increases real wages.” Evaluate this claim using the
Ricardian Model. (50 marks)
(b) Lufbra is an open economy, and it can produce two goods, engines and footballs,
using only labour. Illustrate how productivity growth in Lufbra’s export industry
affects the welfare of its citizens. (50 marks)
2. “In seeking to explain the large observed variation across countries in wage rates,
international differences in technology and productivity are likely to be more important
than international differences in factor endowments.” Evaluate this claim with reference
to the Ricardian and Heckscher-Ohlin-Samuelson (HOS) models. (100 marks)
3. “A rise in the world price of a country’s export good benefits both skilled and unskilled
workers.” Evaluate this claim using the Lerner diagram. (100 marks)
4. (a) Provide intuitive and diagrammatic explanations of the Heckscher-Ohlin-
Samuelson (HOS) Theorem. (75 marks)
(b) What role do assumptions on consumer preferences play in the HOS Theorem?
(25 marks)
5. “A key contribution of imperfectly competitive trade models is their clarification of
important new sources of gains from trade.” Evaluate this claim using appropriate
examples. (100 marks)
6. “The prisoner's dilemma is ever-present in trade-policy interactions between countries.”
Illustrate this observation with examples from Strategic Trade Policy and from tariff
games between large countries under perfect competition. (100 marks)
B E FERRETT
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