Hello, could you Explain your answer in words and using a diagram, Thank you.

SECTION A

Answer each question and explain as per the instructions at the bottom of each question.

QUESTION A.1

The president of a remote island nation has closed the borders of this country to international trade because of the COVID-19 pandemic. Prices of goods and services in this country will be governed by what principle?

A. Autarky.

B. Oligopoly.

C. Autonopoly.

D. Bertrand collusion equilibrium.

(1 mark)

Explain your answer in words and using a diagram

(4marks)

QUESTION A.2

Melitz explains that under free trade

A.No firms will compete in the imported good market.

B.The most efficient firms will compete in the imported good market.

C.The least efficient firms will collude in the imported good market.

D.The most efficient firms will create efficient-oligopoly paradigm, but only in the imported good market .

(1 mark)

Explain your answer in words and using a diagram

(4marks)

QUESTION A.3

In the Pure Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then

A.Both owners of K and owners of A will benefit.

B.Owners of A will benefit.

C.Owners of K will benefit.

D.Neither owners of K nor owners of A will benefit.

(1 mark)

Explain your answer in words and using a diagram

(4marks)

QUESTION A.4

In a Mixed Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then

A.Both owners of K and owners of A will benefit.

B.Owners of A will benefit.

C.Owners of K will benefit.

D.Neither owners of K nor owners of A will benefit.

(1 mark)

Explain your answer in words and using a diagram

(4marks)

QUESTION A.5

A country imposing a tariff can benefit in terms of social welfare if

A.If it is large.

B.If it is small.

C.If it is unskilled-labour intensive.

D.If it is skilled-labour intensive.

(1 mark)

Explain your answer in words and using a diagram

(4marks)

SECTION B

Short answer questions.

Background

Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.

You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialisation (ISI).

You are given a brief about Ghana highlighting the following points:

• About half of Ghana's population depends on agriculture, but Ghana still imports some of its food.
• The majority of Ghana's people live in rural areas and exist on a subsistence way of life.
• Ghana has one of the highest rates of income inequality in the world.
• Nearly half of the population is employed in agriculture.

QUESTION B.1

Why would Ghana trade with a country that is very similar to it? Will trade between Ghana and an almost identical neighbour be governed by comparative advantage?

(5 marks)

QUESTION B.2

Explain import substitution industrialisation and how it can affect Ghana. What role does learning by doing play and when does it make sense for the government to interfere?

(5 marks)

QUESTION B.3

The parliament of Ghana is debating whether import substitution should take the form of quotas or tariffs. You are asked to brief them on the difference between the two. A representative from Ghana's National Labour Party is particularly worried about consumers? Which policy (tariffs or quotas) is better for consumers?

(5 marks)

QUESTION B.4

The president of Ghana is proposing increasing tariffs on rice and providing local rice producers with a subsidy. Explain to parliament the welfare implications of this from the perspective of consumers, producers and the government. Use diagrams to help your explanation.

(5 marks)

QUESTION B.5

After a meeting with Ghana's president you learn that the government is also interested in repatriating migrants that went to European countries to study engineering a decade ago. Explain how this is likely to change Ghana's comparative advantage.

(5 marks)