Problem set 2

Problem set 2 - < 2nd Problem Set > E 101:...

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< 2 nd Problem Set > E 101: International Trade (Summer II, 2008) 1. Assume that Chile produces 2 commodities, tin and food. Examine the impacts of Chilean biased growth in the production tin on the social welfare . i) First examine the case where there is no change in terms of trade [(P tin /P food ) I ]. ii) Examine the case where TOT (terms of trade [(P tin /P food ) I ] ) has deteriorated after the biased growth in the production of tin. iii) If the price elasticity of demand on tin is very low in world market, what is the welfare impacts of biased growth in the production of tin? [* Explain using diagrams in all three questions above] 2. Evaluate whether the following argument is true or not: “The international income transfer (i.e., aids) from Japan to Indonesia under the form of ODA (Official Development Aids) actually benefits Japanese economy.” Explain why. (Explain using the concepts of TOT & price elasticity of demand for the Japanese export goods in Japan and Indonesia.) 3. Suppose that fixed costs for a firm in the automobile industry are $5 billion and that
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This note was uploaded on 10/01/2008 for the course ECON 101 taught by Professor Jacobson during the Spring '03 term at UCSD.

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Problem set 2 - &lt; 2nd Problem Set &gt; E 101:...

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