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Practice Exam Questions
BS2286 - International Business Economics
Below are some past exam questions. We will be looking at some of these in the
sessions during the final week of the semester. Please feel free to have a go at
some of these questions before we get to these sessions w/c 28th March 2022.
The word count for each answer is a maximum of 750 words (+/- 10% and ex-
cluding diagrams).
Question 1
Using the 2×2×2 Heckscher Ohlin Model, explain how the pattern of international
trade is determined. Furthermore, analyse who gains and who loses from interna-
tional trade.
In your answer, please make sure you list the model assumptions, and use an-
notated diagram to show the pre-trade and post-trade situations.
(100 marks)
Question 2
Analyse the economic impact of an export subsidy on the welfare of customers,
suppliers and the government relative to a scenario where there are no export sub-
sidies. In your answer, distinguish between the effects for the exporter compared
to the importer.
(100 marks)
Question 3
Using the Ricardian Model, analyse what happens when the two countries USA
and Canada liberalise their trade with one another. The per-unit labour require-
ment for producing pizza and jeans are described below.
1
Pizza Jeans
USA aLP = 4 aLJ = 8
Canada a∗LP = 2 a
∗
LJ = 2
In your answer, make sure you describe concepts relevant to the model, list the
assumptions, and use an annotated diagram to illustrate autarky (i.e. pre-trade)
and post trade scenarios.
(100 marks)
Question 4
Assuming a representative firm is operating in monopolistically competitive environ-
ment, explain how opening up for international trade affects the firm’s demand
and marginal revenue (MR) curve and from this analyse the potential winners and
losers post-trade.
In your answer, make sure you describe concepts relevant to the model, list the
assumptions, and use an annotated diagram to illustrate autarky (i.e. pre-trade)
and post-trade scenarios.
(100 marks)
Question 5
(a) Outline the many forms of economic integration.
(25 marks)
(b) Using diagrams discuss the welfare effects of a trade creating customs union
and a trade diverting customs union. What determines the magnitude of
the effects?
(75 marks)
Question 6
Using AD/AS analysis, analyse how the credit crunch within the Eurozone has
unfolded with particular reference to Greece and Germany. How did the two
countries respond to the credit crunch? Are there reasons to be optimistic about
the future of the Eurozone?
