Answer the following. questions as attached below.
EF5400 Advanced International Trade Practice Problem Set 1 1. Consider an economy in which there are two countries, i = 1,2, and a continuum of goods, indexed by ke [0, 1]. Goods are produced using labor: Mi (k ) = 4 (1) / m (k) . where a; (k) is the unit labor requirement for producing good & in country i, y (k) is the output of good & produced in country i and l (k) is the amount of labor used in production. Assume that the unit labor requirement functions are an (k) = call-*) 12 (k) = cox The representative consumer in each country has the utility function [ lage ( R ) LA. This consumer is endowed with 4 units of labor where h = 12 = I. (a) Define an equilibrium of the economy. Calculate expressions for all of the equilibrium prices, p.(k), and quantities, c(k), y:(k), and (k). Draw a graph that illustrates the pattern of specialization in production, consumption, and trade. (b) Suppose now each country imposes an ad valorem tariff ~ on imports from the other country. Repeat the analysis of part (a). (c) For the model in part (b), calculate GDP in each country. 2. Consider an economy in which there is a continuum of goods, s E [0, 09). which are ordered so that higher-indexed goods involve more advanced tech- nologies in the production process. An individual consumer has preferences given by u(c) = e- log (c(s, t ) + 1) ds dt.concept of were around 12. and 2000. roughout Study Questions .. f the store as sand- 1. A convenience store chain attempts to be responsive and other per- provide customers with what they need, when they need it, where they need it. What are some different ways that a suppliers convenience store supply chain can be responsive? What here they are some risks in each case? Requests 2. Seven-Eleven's supply chain strategy in Japan can be DC, and described as attempting to micro-match supply and e stores. demand using rapid replenishment. What are some risks od sold, associated with this choice? was pre- 3. What has Seven-Eleven done in its choice of facility loca- America tion, inventory management, transportation, and informa- period, tion infrastructure to develop capabilities that support its very to supply chain strategy in Japan? 4. Seven-Eleven does not allow direct store delivery in Japan ed very but has ail products flow through its distribution center. What benefit does Seven-Eleven derive from this policy? goal of When is direct store delivery more appropriate? rbucks 5. What do you think about the 7dream concept for Seven- even in Eleven Japan? From a supply chain perspective, is it is sales likely to be more successful in Japan or the United rest of States? Why? to 35 6. Seven-Eleven is attempting to duplicate the supply chain ales in structure that has succeeded in Japan and the United pecial States with the introduction of CDCs. What are the pros and cons of this approach? Keep in mind that Canada stores are also replenished by wholesalers and DSD by from manufacturers. . The 7. The United States has food service distributors that also replenish convenience stores. What are the pros and cons was to having a distributor replenish convenience stores versus how- a company like Seven-Eleven managing its own distribu- North tion function?4} Consider two countries: Japan and Korea. In 1996 Japan experienced relatively slow output growth (1%}, while Korea had relatively robust output growth {6%}, Suppose the Bank of Japan allowed the money supply to grow by 2% each year, while the Bank of Korea chose to maintain relatively high money growth of 12% per year. For the following questions, use the simple monetary model {where L is constant], You will nd it easiest to treat Korea as the home country and Japan as the foreign country. {20p} a. 1What is the ination rate in Korea? In Japan? h.What is the expected rate of depreciation in the Korean won reiative to the Japanese yen 'i' c. Suppose the Bank of Korea increases the money growth rate from 12% to 15%, If nothing in Japan changes, what is the new inflation rate in Korea? 5) In this question, we're going to use a game tree and backward induction to analyze a Stackelberg problem. In this case, each firm has 3 options: to produce a low level of output, a medium level of output, or a high level of output. The payoffs to each firm given each firm's output choice are: (KA, KB) B: High B:Medium B: Low A: High (0,0) (75,50) (112.50, 56.25) A: Medium (50,75) (100, 100) (125, 93.75) A: Low (56.25, 112.50) (93.75, 125) (112.50, 112.50) a) What is the Nash equilibrium when both firms choose their output at the same time? Explain. You must prove that your answer satisfies the definition of Nash equilibrium. b) Now assume that firm A can choose its output first. Fill in the following game tree for this sequential game. Each of the 9 payoff combinations above corresponds to one of the 9 endpoints of the game tree. I've filled in (Med, High) to get you started. A chooses L M H B chooses L M H M H M H A M. B-H (50,75) c) Now that you've filled in the tree, use backward induction to find the equilibrium for this game. Briefly describe why your answer is different than in 6a. Figure out B's best response to each of A's possible actions. Then, pick the one of those three options that maximizes A's profit, given how B will respond
