Intnl Financial Pol
Intnl Financial Pol PUBPOL 542
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This 1 page Class Notes was uploaded by Ms. Abbey Ritchie on Thursday October 29, 2015. The Class Notes belongs to PUBPOL 542 at University of Michigan taught by Kathryn Dominguez in Fall. Since its upload, it has received 26 views. For similar materials see /class/231666/pubpol-542-university-of-michigan in Law Societies and Justice/ Political Science at University of Michigan.
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Date Created: 10/29/15
University of Michigan Ford School of Public Policy Public Policy 542 Winter 2009 Prof Giuseppe De Arcangelis 1 4 Problem Set 1 Country 1 is endowed with 100 units of labor and with 80 units of capital Country 2 is endowed with 300 units of labor and 240 units of capital The two goods A and B are produced with CRS production functions good A is said to be Kintensive and good B as L intensive Preferences and technologies are the same for the two countries a Which country is exporting good A b Assume that the endowment of Country 2 is now 300 units of labor and 100 units of capital What are the new patterns of trade Who is exporting what c What will happen to the price of capital and to the price of labor if there is free trade between the two countries d What happens to trade if some residents of Country 2 decide to migrate to Country 1 and international prices are constant The introduction of a tariff on red wine Merlot reduces imports from 300 bottles to 200 bottles and the specific tariff is equal to 3 We assume that the market for red wine Merlot is perfectly competitive a What is the tariff revenue if this is a small country b What is the tariff revenue if this is a big country and the international price of Merlot decreases by l c Discuss the effects on total welfare in the two cases Let us assume now that the market of wine is imperfectly competitive and it is characterized by increasing returns to scale IRS and horizontal product differentiation a Give examples of horizontal product differentiation in wine b Give an explanation why there may be IRS in the wineproducing firms c In Country 1 there are only 7 firms and each one produces a different type of wine red white rose etc What would be the effect of opening up to trade with Country 2 that produces other 7 different kinds of wine List at least 3 effects
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