Use the information in the table below to answer the following questions.
Production per unit of Labour:
US France
Clothing 400 500
Autos 200 300
(a) Does either country have an absolute advantage in the production of clothing or autos? Explain.
(b) What is the opportunity cost of autos in each country?
(c) What is the opportunity cost of clothing in each country?
(d) Analyze comparative advantage and opportunities for trade between the U.S. and France.
- (20%) Explain the main arguments for governments to protect domestic industry.
- (20%) Explain the role of the International Monetary Found on international investment. What does most favoured nation (MFN) mean?
- (20%) Read the following text and answer the question below
“The golden age of globalisation, in 1990-2010, was something to behold. Commerce soared as the cost of shifting goods in ships and planes fell, phone calls got cheaper, tariffs were cut and the financial system liberalised. International activity went gangbusters, as firms set up around the world, investors roamed and consumers shopped in supermarkets with enough choice to impress Phileas Fogg.
Globalisation has slowed from light speed to a snail’s pace in the past decade for several reasons. The cost of moving goods has stopped falling. Multinational firms have found that global sprawl burns money and that local rivals often eat them alive. Activity is shifting towards services, which are harder to sell across borders: scissors can be exported in 20ft-containers, hair stylists cannot. And Chinese manufacturing has become more self-reliant, so needs to import fewer parts.”