Question 1:
1.1 Explain the short and long run effects of capital transition in the form of Foreign Direct
Investment in manufacturing in a country on the wages of workers, production, nominal and
real rentals of capital and land, and the marginal productivities of labour, capital and land in
the receiving country.
[25%]
1.2 Discuss four possible characteristics of a receiving country that increases the inflow of
Foreign Direct Investment in the form of capital?
[25%]
Question 2:
2.1 In the model of trade under monopolistic competition, discuss the short- and long-run
monopolistic competition equilibrium with trade, detailing changes in demand, prices,
number of goods and producers, profit, and costs. Compare the no trade and trade
equilibria.
[25%]
2.2 Discuss three possible gains and losses of a country in monopolistic competition when
starting trade?
[25%]
Question 3:
3.1 Given the Specific-Factors model, imagine two countries, Home and Foreign (marked
with *) producing two goods with three production factors: labour (L), capital (K) and land (T).
The two goods produced are: Food (A) using Land and Labour, Cars (M) using Capital and
Labour. The relative price for cars is lower in the home country than in the foreign country
before trade.
In which good would home country have a comparative advantage? How would the real
wages for labour, real rental for capital and real rental for land change when home country
starts trading with the foreign country, exporting the good it has a comparative advantage in?
[25%]
– continued overleaf –
4
3.2 Due to Brexit and other circumstances, demand and prices for goods in the UK have
recently changed. Explain what possible effects such changes in demand and prices for
goods can have on the comparative advantages, import and export volume and nominal &
real wages in the UK.
[25%]
EXTOK_ECON4018_1C_International Trade_In-course-exam_21-22
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The post 1.1 Explain the short and long run effects of capital transition in the form of Foreign Direct Investment in manufacturing in a country on the wages of workers, production, nominal and real rentals of capital and land, and the marginal productivities of labour, capital and land in the receiving country. [25%] 1.2 Discuss four possible characteristics of a receiving country that increases the inflow of Foreign Direct Investment in the form of capital? [25%] appeared first on Apax Researchers.
