BS3317 International Trade Assignment Questions 2026 | Aston University

BS3317 Assignment Question 

Instructions

• Answer ANY THREE (3)
• All questions carry equal marks.

WORD COUNT/LIMIT: 1000 words (+10%) per question (including all questions to be answered)

Question 1

Suppose there are 2 countries Home (H) and Foreign (F) producing 2 goods Apples (A) and Bananas (B) using only labour within a Ricardian model. In addition, we have the information that there are 1,200 units of labour at Home () and there are 800 units of labour at Foreign ()  Assume the unit labour requirements are as follows for each country and good:

a) In the absence of trade and when both goods are produced, what would be the relative price of Apples to Bananas () in each country?

(15 marks)

b) Draw the relative Supply schedule.

(20 marks)

In the remaining questions assume that the countries open up to free trade.

c) If the new world price of Apples and Bananas is respectively, then which of the 2 goods is going to be produced in each country and why?  

(15 marks)

d)Describe the pattern of trade.

(15 marks)

e)Show that both Home and Foreign gain from trade.

(15 marks)

f) What happens to the real wages at Home and Foreign as we move from Autarky to Free Trade?

(20 marks)

Question 2

Netherlands is relatively well endowed with skilled workers compared to India, which is relatively well endowed with unskilled workers. Assume that the production of TVs intensively uses skilled workers and the production of shoes intensively uses unskilled workers. Using the Heckscher-Ohlin model, show diagrammatically and explain which country:

a) you would expect to have the highest relative wage in skilled labour with no trade?

(20 marks)

b) has the highest relative price of TVs prior to trading?

(20 marks)

c) under free trade, exports TVs and which exports shoes?

(20 marks)

d) under free trade, experiences an increase in the relative wage of skilled workers?

(40 marks)

Question 3

a) State and briefly discuss the Heckscher-Ohlin-Vanek Theorem

(20 marks)

b) Assume there are 3 countries in the world the UK, Germany and India, using Capital, Skilled Labour and Unskilled Labour to produce a Capital-intensive good, a Skilled Labour-intensive good and an Unskilled Labour-intensive one.

Use the information in the table below to answer the following questions:

i. For each country, show and explain whether it is abundant or scarce in each factor

(15 marks)

ii. Calculate and discuss the FCT_K (Factor Content of Trade for Capital), the FCT_SL (Factor Content of Trade for Skilled Labour) and the FCT_UL (Factor Content of Trade for Unskilled Labour) for each country?

(20 marks)

iii. The services of which factor will import and export each country?

(20 marks)

Country Statistics on K, SL, UL and GDP

iv. Moving from Autarky to Free Trade which good’s production expands and which good’s production contracts in each country?

(25 marks)

Question 4

Japan primarily exports manufactured goods, while importing raw materials such as food and oil. Analyse with the use of diagrams the impact on Japan’s terms of trade of the following events:

a) A war in the Middle East disrupts oil supply

(20 marks)

b) South Korea develops the ability to produce cars that it can sell in Canada and the US

(20 marks)

c) US engineers develop a fusion reactor that replaces fossil fuel electricity plants

(20 marks)

d) A harvest failure in Russia

(20 marks)

e) A reduction in Japan’s tariffs on imported beef and citrus fruit

(20 marks)

Question 5

Suppose that in the US the computer industry is described by Monopolistic Competition. The firms are symmetric and the demand for each of them is given by the following expression, Q= S^US [(1/n) –(1/120)*(P-P*)], where Q is sales of each firm, S^US is the size of the US market, n is the number of firms, P is the price charged by each firm and P* is the average price charged. Total Cost (TC) for each firm is,

TC=15,000+40Q and the US computer market (S^US) is worth £50,000

a) Calculate and show with the use of a diagram the number of firms that will be operating in the US market and the price that will be charged in autarky

(30 marks)

b) If Free International Trade is allowed for computers between the US and the UK and the size of the market in the UK is £41,125 (all the other characteristics of the British industry are the same like the American one), then show with the use of a diagram and calculate the new international price and the number of firms that will operate in both countries.

(40 marks)

c) Is Free International Trade between the 2 countries welfare improving for the US?

(30 marks)

End Of Paper

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