PART A. ANSWER ALL QUESTIONS. 1. (a) What is meant by labor-intensive commodity, Capital- labor ratio and labor abundant nation? (3 marks) (b) What is the reason for increasing opportunity costs? (2 marks) (c) State the Heckscher-Ohlin theory for the case of two nations and two (2 marks) (d) What effect do the various types of factor growth have on the growing nation's production frontier? (illustrate using diagrams) (3 marks) (e) Which is a more restrictive barrier to trade, an import quota or an equivalent import tariff (2 marks) (1) What are the dynamic gains to the nations forming a customs union? (3 marks) PART B. ANSWER ANY THREE 2. Consider table one below Table 1 ZAMBI ZIMBABW Wheat (bushels/labor-hour) 6 Cloth (yards/ labor-hour) 1 (a) Indicate in what commodity Zambia and Zimbabwe have an absolute advantage. (2 marks) (b) How much would each of the two nations gain if 6W were exchanged for 3C? (4 marks) (c) How much would each of the two nations gain if 6W were exchanged for 6C? (4 marks) (d) What quantities of C for 6W represent the limits within which mutually advantageous trade between Zambia and Zimbabwe can take place? Justify. (5 marks) E 1 3