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INTERNATIONAL TRADE
ECS3702 EXAM PACK
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COMPILLED BY PHILLIP & BRIDGET
, May/June 2015
(A) Complete the following table using the information above.
Gold Tea
South Africa 4 20
Kenya 1 5
(B) Which country has an absolute advantage in the production of gold? tea?
Gold is South Africa that is 4 compared to 1 of Kenya.
Tea is South Africa 20 as compared to 5 of Kenya.
(C) South Africa and Kenya have equal advantage.in production of both goods. For
RSA 1g means a sacrifice of 5tea.the same for Kenya.
(D)No gains, because the countries have equal advantage .meaning the opportunity
costs are the same between the countries.
(E) The sacrifice made produce a unit of a good must be different. The country that
sacrifices less must produce the good whilst the one that sacrifices more to produce the
good must import it.
(E) What might make the two countries have different opportunity costs?
, Question 2
Use the figure below to answer question 2
(a) (i) What is the autarky price and quantity demanded and supplied?
ANSWER: 35
(ii) If the world price of good Q is R20 per unit, assuming free trade, calculate the total
quantity of imports
20000-1800=18200
(iii) With a tariff of r5 per unit, calculate the quantity of imports
12000-2000=10000
(b)With the above tariff imposed, how much is government revenue going to be:
10000*5=50000.
(c) If the government decides instead to impose an import quota and not a tariff, what is
the amount of quota that would produce the same effect on the amount of imports as
the above tariff? (5)
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