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ECS3702 Assignment 01 for Semester 1 2021
INTERNATIONAL TRADE
1. International economics is concerned with
[1] The flow of goods, services and payments among nations
[2] Policies directed at regulating the flow of goods, services and payments
[3] The effects of policies on the welfare of a nation
[4] All of the above
International economics is concerned with the effects upon economic activity from international
differences in productive resources and consumer preferences and the international institutions that
affect them.
2. An increase in the rand price of a foreign currency will usually
[1] Benefit South African exporters
[2] Benefit South African importers
[3] Benefit South African importers and exporters
[4] Harm South African importers and exporters
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign
reference currencies, typically in a floating exchange rate system in which no official currency value is
maintained. Currency appreciation in the same context is an increase in the value of the currency.
3 According to the mercantilists, trade is a ----------------, however, subsequent trade theories have
argued that trade is a --------------------
[1] negative sum game, zero sum game
[2] zero sum game, negative sum game
[3] zero sum game, positive sum game
[4] positive sum game, negative sum game
Mercantilists were a group of writers in Europe during the period 1500 to 1800, they were merchants,
bankers, government officials and philosophers. International trade can be viewed as either a zero
sum game or as a positive sum game. Their motivation for trade was self-interest and the gains of
winners are offset by the losses of the losers, hence the expression "zero sum game".
3. The mercantilists’ argument was based on the idea that
[1] All nations benefited from trade
[2] No nation benefited from trade
[3] A nation’s wealth and power were fostered most effectively by protecting domestic producers
from overseas competition
[4] A nation’s wealth and power were fostered most effectively by protecting the wealthy from
overseas ccompetition
According to the mercantilists, the economic welfare of a country depends on a strong foreign trade
surplus and would contribute to greater spending and to an increase in domestic output, employment
and prosperity. Mercantilists argued that to achieve these objectives, governments should encourage
, Call 0618441387 for assistance with online classes, exam packs and exam assistance
exports and restrict imports by imposing tariffs, quotas and other commercial policies.
Use the information in the table below to answer questions 5 and 6.
Labour requirement per South Africa Mauritius
hour
Shoes 10 1 60 1
Headphones 20 2 30 0.5
5. From the information in the table above
[1] South Africa has an absolute advantage in producing shoes
[2] Mauritius has an absolute advantage in producing headphones
[3] South Africa has an absolute disadvantage in producing headphones
[4] Mauritius has an absolute advantage in producing shoes
The principle of absolute advantage refers to the ability of a party to produce a good or service more
efficiently than its competitors. Adam Smith first described the principle of absolute advantage in the
context of international trade, using labor as the only input.
6. From the information in the table above
[1] Mauritius has a comparative advantage in producing shoes
[2] Mauritius has a comparative disadvantage in producing shoes
[3] South Africa has a comparative advantage in producing shoes
[4] South Africa has a comparative advantage in producing both shoes and headphones
The law of comparative advantage describes how, under free trade, an agent will produce more of
and consume less of a good for which they have a comparative advantage.
7. The commodity that a nation has the smallest absolute disadvantage in is its commodity of
[1] Comparative disadvantage
[2] Absolute advantage
[3] Absolute disadvantage
[4] Comparative advantage
Assume that both Tunisia and Morocco produce coffee and cheese with the following outputs. Use
the tables below to answer question 8.
Scenario A
Tunisia Morocco
Coffee [ton/hr] 8 2
Cheese [ton.hr] 2 4
Scenario B
Tunisia Morocco
Coffee [ton/hr] 8 4
Cheese [ton/hr] 4 2
8. Which of the following statements is correct?
[1] Tunisia has an absolute advantage in producing both products in both scenarios
[2] Tunisia has an absolute advantage in producing coffee in scenario A and an absolute advantage in
producing coffee and cheese in scenario B
[3] Morocco has an absolute advantage in producing both products in both scenarios
[4] Morocco has an absolute advantage in producing coffee in scenario A and an absolute
disadvantage in producing cheese in scenario B
Assume that both Tunisia and Morocco produce coffee and cheese with the following outputs. Use
the table below to answer questions 9 to 11.
ECS3702 Assignment 01 for Semester 1 2021
INTERNATIONAL TRADE
1. International economics is concerned with
[1] The flow of goods, services and payments among nations
[2] Policies directed at regulating the flow of goods, services and payments
[3] The effects of policies on the welfare of a nation
[4] All of the above
International economics is concerned with the effects upon economic activity from international
differences in productive resources and consumer preferences and the international institutions that
affect them.
2. An increase in the rand price of a foreign currency will usually
[1] Benefit South African exporters
[2] Benefit South African importers
[3] Benefit South African importers and exporters
[4] Harm South African importers and exporters
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign
reference currencies, typically in a floating exchange rate system in which no official currency value is
maintained. Currency appreciation in the same context is an increase in the value of the currency.
3 According to the mercantilists, trade is a ----------------, however, subsequent trade theories have
argued that trade is a --------------------
[1] negative sum game, zero sum game
[2] zero sum game, negative sum game
[3] zero sum game, positive sum game
[4] positive sum game, negative sum game
Mercantilists were a group of writers in Europe during the period 1500 to 1800, they were merchants,
bankers, government officials and philosophers. International trade can be viewed as either a zero
sum game or as a positive sum game. Their motivation for trade was self-interest and the gains of
winners are offset by the losses of the losers, hence the expression "zero sum game".
3. The mercantilists’ argument was based on the idea that
[1] All nations benefited from trade
[2] No nation benefited from trade
[3] A nation’s wealth and power were fostered most effectively by protecting domestic producers
from overseas competition
[4] A nation’s wealth and power were fostered most effectively by protecting the wealthy from
overseas ccompetition
According to the mercantilists, the economic welfare of a country depends on a strong foreign trade
surplus and would contribute to greater spending and to an increase in domestic output, employment
and prosperity. Mercantilists argued that to achieve these objectives, governments should encourage
, Call 0618441387 for assistance with online classes, exam packs and exam assistance
exports and restrict imports by imposing tariffs, quotas and other commercial policies.
Use the information in the table below to answer questions 5 and 6.
Labour requirement per South Africa Mauritius
hour
Shoes 10 1 60 1
Headphones 20 2 30 0.5
5. From the information in the table above
[1] South Africa has an absolute advantage in producing shoes
[2] Mauritius has an absolute advantage in producing headphones
[3] South Africa has an absolute disadvantage in producing headphones
[4] Mauritius has an absolute advantage in producing shoes
The principle of absolute advantage refers to the ability of a party to produce a good or service more
efficiently than its competitors. Adam Smith first described the principle of absolute advantage in the
context of international trade, using labor as the only input.
6. From the information in the table above
[1] Mauritius has a comparative advantage in producing shoes
[2] Mauritius has a comparative disadvantage in producing shoes
[3] South Africa has a comparative advantage in producing shoes
[4] South Africa has a comparative advantage in producing both shoes and headphones
The law of comparative advantage describes how, under free trade, an agent will produce more of
and consume less of a good for which they have a comparative advantage.
7. The commodity that a nation has the smallest absolute disadvantage in is its commodity of
[1] Comparative disadvantage
[2] Absolute advantage
[3] Absolute disadvantage
[4] Comparative advantage
Assume that both Tunisia and Morocco produce coffee and cheese with the following outputs. Use
the tables below to answer question 8.
Scenario A
Tunisia Morocco
Coffee [ton/hr] 8 2
Cheese [ton.hr] 2 4
Scenario B
Tunisia Morocco
Coffee [ton/hr] 8 4
Cheese [ton/hr] 4 2
8. Which of the following statements is correct?
[1] Tunisia has an absolute advantage in producing both products in both scenarios
[2] Tunisia has an absolute advantage in producing coffee in scenario A and an absolute advantage in
producing coffee and cheese in scenario B
[3] Morocco has an absolute advantage in producing both products in both scenarios
[4] Morocco has an absolute advantage in producing coffee in scenario A and an absolute
disadvantage in producing cheese in scenario B
Assume that both Tunisia and Morocco produce coffee and cheese with the following outputs. Use
the table below to answer questions 9 to 11.
