QUESTION 1 (11 MARKS) Define the following terms: QUESTION 2 (34 MARKS) 2.1 Initially it is assumed that between SA and Lesotho it is impossible to trade buttons across national borders. Assume that both countries produce blankets. Notes: • In the absence of trade between the two countries, the price of blankets in SA is lower than the Lesotho’s price of blankets. • In each country the production of blankets is subject to economies of scale which leads to a forward falling supply curves in both countries. You are required to do the following: a) Graphically show the situation of both countries before trade. (10) TERM DEFINITION External economies of scale. (2) Labour market pooling. (3) Internal economies of scale. (2) Intra-industry trade. (2) Local content requirement. (2)
b) Subsequent to the above illustration, graphically show the situation after trade has occurred between the two countries. (8) 2.2. Case study 1 (6 Marks) In an imperfect competition, firms are aware that they can influence the prices of their products and that they can sell more only by reducing their price. This situation occurs when there are only a few major producers of a particular product or when each firm produces a product that is differentiated from that of rival firms. Each firm views itself as a price setter, choosing the price of its product.
QUESTION 3 (17 MARKS) 3.1 List and explain four types of tariffs and non-tariffs barriers. (4) 3.2 Use the four type of barriers that you listed in question 3.1 and complete the
- Winter '11
- International Trade