Time: 2:00 hours Maximum
Marks: 25
Attempt any five questions.
All questions carry equal marks.
- Write short notes on any two: 2 ½ + 2 ½
a) Production
Possibility Curve & Opportunity cost
b) Community
Indifference Curve
c) Terms
of Trade
d) Mercantilism
and International Trade
- What are the main differences between interregional and international trade? Why do nations trade? 3 + 2
- Critically evaluate the absolute advantage theory of International Trade. What policies Smith advocate on international trade and role of government? 3 + 2
- Explain the theory of comparative advantage and show how all trading nations could gain from trade. You may use a model of two-countries, two-commodities and one factor to illustrate gains from trade. 5
- What is an offer curve? How is it derived? What is its importance in terms of international trade? 1 +2+2
- In the absence of trade, a nation is in equilibrium when it reaches the highest indifference curve possible given its production frontier. Explain 5
- What is meant by equilibrium relative commodity price? How equilibrium relative commodity price is determined in each nation? How does it define the nation’s comparative advantage? 2+2 +1
- Explain the partial equilibrium analysis model of international trade and show how the equilibrium relative price with trade is determined with demand and supply curve? 5
- Differentiate between the partial equilibrium analysis and general equilibrium analysis of international trade. 5
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