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 up to 200 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 an efficient-oligopoly paradigm, but only in the imported good market.

(1 mark)

Explain your answer in up to 200 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 up to 200 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 up to 200 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 up to 200 words and using a diagram