Global Trade Fall 2021-2022 Part 2 (Mid-Semester Assessment) Section: D Total Time: 70 minutes Total Marks: 15 International Trade between Bangladesh and Bhutan in accordance to the Theory of Absolute Advantage Consider the effects of trade between two countries, Bangladesh and Bhutan. The production of any good (output) requires resources (inputs) such as land, labor, and capital. Assume that Bangladesh and Bhutan both have the same amount of resources and that these resources can be used to produce either Rice or Apples. Assume further that 400 units of resources are available in each country. Imagine that in Bangladesh it takes 10 resources to produce 1 ton of Rice, and 20 resources to produce 1 ton of Apples. Thus, Bangladesh could produce 40 tons of rice and no apples, 20 tons of apples and no rice, or some combination of rice and cocoa between these two extremes. Similarly, imagine that in Bhutan it takes 40 resources to produce 1 ton of Rice and 10 resources to produce 1 ton of Apples. Thus, Bhutan could produce 10 tons of rice and no apples, 40 tons of apples and no rice, or some combination between these two extremes. Now consider a situation in which neither country trades with any other. Each country devotes half its resources to the production of Rice and half to the production of Apples. Each country must also consume what it produces. Without trade, the combined production of both countries would be "E" tons of Rice and "F" tons of Apples. If each country were to specialize in producing the good for which it had an absolute advantage and then trade with the other for the good it lacks, Bangladesh could produce "G" tons of Rice , and Bhutan could produce J tons of Apples. Thus, by specializing, the production of both goods could be increased. Production of Rice would increase from "E" tons to "K" tons, while production of Apples would increase from "F" tons to "L". The increase in production that would result from specialization therefore "M" of Rice and "N" tons of Apples. By engaging in trade and swapping 1 ton of Rice for 1 ton of Apples, producers in both countries could consume more of both Rice and Apples. Imagine that Bangladesh and Bhutan swap Rice and Apples on a one-to-one basis; that is, the price of 1 ton of Rice is equal to the price of 1 ton of Apples. If Bangladesh decided to export 12 tons of Rice to Bhutan and import 12 tons of Apples in return, its final consumption after trade would be "O" tons of Rice and "P" tons of Apples. Similarly, Bhutan's final consumption after trade would be "Q" tons of Rice and "Q" tons of Apples. For Bangladesh, this would be "S" tons more Rice than it could have consumed before specialization and trade and "T" ton more Apples. For Bhutan, this would be "U" tons of Rice than it could have consumed before specialization and trade and "V" tons more Apples. Now based upon the information provided in the above-mentioned trade scenario between Bangladesh and Bhutan, calculate the figures marked in the designated Alphabets. Show the individual calculation below and end the of the calculation insert the figures as marked on the Table. Calculation [10 marks] ALL CALCULATIONS MUST SHOWN IN DETAIL AND THEN FILL-UP THE TABLE ACCORDINGLY You need to write and show the calculations in the separate page 1. Resources Required to Produce 1 Ton of Rice and Apples (1 MARK) Bangladesh Rice [U] = Apples [1] = Bhutan Rice [Ill] = Apples [IV] = 2. Production and Consumption Without Trade (2 MARKS) When Each country devotes half its resources to the production of Rice and half to the production of Apples. Bangladesh Then how much can 'Bangladesh' produce Rice and Apples separately? Rice [A] = Apples [B] = Bhutan Then how much can 'Bhutan' produce Rice and Apples separately? Rice [C] = Apples [D] = Total Production Without Trade Rice [E] = Apples [F] = (2 MARKS) 3. Production with Specialization Bangladesh Rice [G] = Apples [H] = Bhutan Rice [U] = Apples [J] = Total Production with Specialization Rice [K] = Apples [L] = INCREASE IN PRODUCTION Rice [M] = Apples [N] = (2 MARKS) 4. Consumption after Bangladesh Trades 12 Tons of Rice for 12 Tons of Bhutanese Apples. Bangladesh Rice [O] = Apples [P] = Bhutan Rice [Q] = Apples [R] = (3 MARKS) 5. Increase in Consumption as a Result of Specialization and Trade Bangladesh Rice [S] = Apples (T) = Bhutan Rice [U] = Apples M= 6. All Calculations have to be incorporated in the Table below Block 1 - Resources Required to Produce 1 Ton of Rice and Apples Rice Apples Bangladesh = II = Bhutan III = IV = Block 2 - Production and Consumption Without Trade Bangladesh A= BE Bhutan C= D= Total Production E = F = Block 3 - Production with Specialization G= H= Bangladesh Bhutan 1 = J= Total Production K= L = INCREASE IN PRODUCTION M= N = Block 4 - Consumption after Bangladesh Trades 12 Tons of Rice for 12 Tons of Bhutanese Apples Bangladesh O= P= Bhutan Q= R= Block 5 - Increase in Consumption as a Result of Specialization and Trade Bangladesh S= T= Bhutan U= V= Absolute Advantage and the Gains from Trade between Bangladesh and Bhutan Question #2 [2 marks] According to this calculation shown above, what are your thoughts about the trade between the countries as they specialize in certain products, conduct trade and thereafter according to the concept of 'Absolute Advantage'? Question # 3 [3 marks] According to Geert Hofstede's four dimensions in summarizing the different cultures, explain the following with relevant reasoning 'Uncertainty Avoidance Dimension' and 'Power Distance"? Global Trade Fall 2021-2022 Part 2 (Mid-Semester Assessment) Section: D Total Time: 70 minutes Total Marks: 15 International Trade between Bangladesh and Bhutan in accordance to the Theory of Absolute Advantage Consider the effects of trade between two countries, Bangladesh and Bhutan. The production of any good (output) requires resources (inputs) such as land, labor, and capital. Assume that Bangladesh and Bhutan both have the same amount of resources and that these resources can be used to produce either Rice or Apples. Assume further that 400 units of resources are available in each country. Imagine that in Bangladesh it takes 10 resources to produce 1 ton of Rice, and 20 resources to produce 1 ton of Apples. Thus, Bangladesh could produce 40 tons of rice and no apples, 20 tons of apples and no rice, or some combination of rice and cocoa between these two extremes. Similarly, imagine that in Bhutan it takes 40 resources to produce 1 ton of Rice and 10 resources to produce 1 ton of Apples. Thus, Bhutan could produce 10 tons of rice and no apples, 40 tons of apples and no rice, or some combination between these two extremes. Now consider a situation in which neither country trades with any other. Each country devotes half its resources to the production of Rice and half to the production of Apples. Each country must also consume what it produces. Without trade, the combined production of both countries would be "E" tons of Rice and "F" tons of Apples. If each country were to specialize in producing the good for which it had an absolute advantage and then trade with the other for the good it lacks, Bangladesh could produce "G" tons of Rice , and Bhutan could produce J tons of Apples. Thus, by specializing, the production of both goods could be increased. Production of Rice would increase from "E" tons to "K" tons, while production of Apples would increase from "F" tons to "L". The increase in production that would result from specialization therefore "M" of Rice and "N" tons of Apples. By engaging in trade and swapping 1 ton of Rice for 1 ton of Apples, producers in both countries could consume more of both Rice and Apples. Imagine that Bangladesh and Bhutan swap Rice and Apples on a one-to-one basis; that is, the price of 1 ton of Rice is equal to the price of 1 ton of Apples. If Bangladesh decided to export 12 tons of Rice to Bhutan and import 12 tons of Apples in return, its final consumption after trade would be "O" tons of Rice and "P" tons of Apples. Similarly, Bhutan's final consumption after trade would be "Q" tons of Rice and "Q" tons of Apples. For Bangladesh, this would be "S" tons more Rice than it could have consumed before specialization and trade and "T" ton more Apples. For Bhutan, this would be "U" tons of Rice than it could have consumed before specialization and trade and "V" tons more Apples. Now based upon the information provided in the above-mentioned trade scenario between Bangladesh and Bhutan, calculate the figures marked in the designated Alphabets. Show the individual calculation below and end the of the calculation insert the figures as marked on the Table. Calculation [10 marks] ALL CALCULATIONS MUST SHOWN IN DETAIL AND THEN FILL-UP THE TABLE ACCORDINGLY You need to write and show the calculations in the separate page 1. Resources Required to Produce 1 Ton of Rice and Apples (1 MARK) Bangladesh Rice [U] = Apples [1] = Bhutan Rice [Ill] = Apples [IV] = 2. Production and Consumption Without Trade (2 MARKS) When Each country devotes half its resources to the production of Rice and half to the production of Apples. Bangladesh Then how much can 'Bangladesh' produce Rice and Apples separately? Rice [A] = Apples [B] = Bhutan Then how much can 'Bhutan' produce Rice and Apples separately? Rice [C] = Apples [D] = Total Production Without Trade Rice [E] = Apples [F] = (2 MARKS) 3. Production with Specialization Bangladesh Rice [G] = Apples [H] = Bhutan Rice [U] = Apples [J] = Total Production with Specialization Rice [K] = Apples [L] = INCREASE IN PRODUCTION Rice [M] = Apples [N] = (2 MARKS) 4. Consumption after Bangladesh Trades 12 Tons of Rice for 12 Tons of Bhutanese Apples. Bangladesh Rice [O] = Apples [P] = Bhutan Rice [Q] = Apples [R] = (3 MARKS) 5. Increase in Consumption as a Result of Specialization and Trade Bangladesh Rice [S] = Apples (T) = Bhutan Rice [U] = Apples M= 6. All Calculations have to be incorporated in the Table below Block 1 - Resources Required to Produce 1 Ton of Rice and Apples Rice Apples Bangladesh = II = Bhutan III = IV = Block 2 - Production and Consumption Without Trade Bangladesh A= BE Bhutan C= D= Total Production E = F = Block 3 - Production with Specialization G= H= Bangladesh Bhutan 1 = J= Total Production K= L = INCREASE IN PRODUCTION M= N = Block 4 - Consumption after Bangladesh Trades 12 Tons of Rice for 12 Tons of Bhutanese Apples Bangladesh O= P= Bhutan Q= R= Block 5 - Increase in Consumption as a Result of Specialization and Trade Bangladesh S= T= Bhutan U= V= Absolute Advantage and the Gains from Trade between Bangladesh and Bhutan Question #2 [2 marks] According to this calculation shown above, what are your thoughts about the trade between the countries as they specialize in certain products, conduct trade and thereafter according to the concept of 'Absolute Advantage'? Question # 3 [3 marks] According to Geert Hofstede's four dimensions in summarizing the different cultures, explain the following with relevant reasoning 'Uncertainty Avoidance Dimension' and 'Power Distance