Problem 2
Which of the following statements is correct? (a) Now that services account for over 80 per cent of GDP in most developed countries, trade in goods cannot be the major part of the world trade. (b) International trade in services is not possible. (c) The only reason that trade in goods remains so important is that countries import goods, add a bit and then re-export them.
Problem 3
Essay question Over the last 60 years, international trade has grown much more quickly than world output. How can this occur? Can it go on indefinitely?
Problem 3
A country with uniformly low productivity should prevent foreign competition.Discuss.
Problem 4
Common fallacies Why are these statements wrong? (a) British producers are becoming uncompetitive in everything. (b) Buy British and help Britain.
Problem 7
Usually, participating in the world economy leaves a country better-off, even though there may be winners and losers within the country. (a) Will workers with skills useful to the export industries be better or worse off when a country opens up to international trade? (b) What about workers in industries whose output is now displaced by imports? (c) Could technical progress in the export industry then ever leave a country worse off? Why, or why not?
Problem 8
To preserve its heritage, a country bans exports of works of art. (a) Is this better than an export tax? (b) Who gains and loses from the ban? (c) Does it encourage young domestic artists?
Problem 10
Discuss the infant industry argument for a tariff on imports.
Problem 11
How can an export subsidy, which promotes international trade, be protectionist? Illustrate your answer with a diagram.
Problem 12
A perfectly competitive industry faces domestic demand \(q_{d} 5100-p\) and has the industry supply curve \(q_{s} 5401 p\). (a) If the world price is \(£ 50\), what is the value of net exports? (b) If the world price is \(£ 20\), what is the value of net exports? (c) In the absence of trade, what is the equilibrium domestic price? (d) At a world price of \(£ 20\), suppose the government levies a tariff of \(£ 5\) per unit. Calculate the value of tariff revenue and the total value of the two deadweight loss triangles.
