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    Soal UTS Pak Fithra

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    Asep Obi

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    Soal UTS Pak Fithra

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    Asep Obi
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    Soal UTS Pak Fithra

    Uploaded by

    Asep Obi

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    © All Rights Reserved
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    UNIVERSITAS INDONESIA

    FACULTY OF ECONOMICS AND BUSINESS


    UNDERGRADUATE PROGRAM

    MID EXAM
    Odd Semester 2019/2020
    International Economics/Ekonomi Internasional - A
    Lecture: Fithra Faisal Hastiadi
    Duration: 3 hours /Open Book & Open Note

    1. Assuming that there are only two countries in the world, Indonesia and ROW (Rest of the
    World) which both produce Cloth (C) and Food (F) using labor as factor production. The
    following table shows the number of hours of work needed to produce one unit of C and F in
    both countries:

    Cloth (C) Food (F)


    Indonesia 1 hour per meter 2 hour per kg

    ROW 6 hour per meter 3 hour per kg

    Please answer the followings:


    a. If we use the Smithian Absolute advantage, can both countries gain? Why?
    b. Eventually, these countries can still trade, please explain
    c. Please show the gains from trade for producers and consumers in both
    countries
    d. Can we see a catching up (factor price) pattern for both countries?

    2. “Consider two countries producing the same good with the same constant
    returns to scale production function, relating output to homogeneous capital and
    labor inputs. ... the Law of Diminishing Returns implies that the marginal product of
    capital is higher in the less productive (i.e., in the poorer) economy. If so, then if
    trade in capital good is free and competitive, new investment will occur only in the
    poorer economy, and this will continue to be true until capital-labor ratios, and hence
    wages and capital returns, are equalized.” – Robert E. Lucas, American Economic
    Review, 1990. Within the set-up of Lucas' statement – output produced by capital
    and labor with constant returns to scale and the same technology being accessible
    to all countries – how can our models of international trade explain why capital flows
    do not occur the way Lucas argues they should?

    3. You have become a (well-paid) consultant to the Government of Indonesia on


    trade policy. Indonesia is an importer of Cars and an exporter of Steel. Suppose that
    you are choosing between advocating an import tariff on steel and an export subsidy
    on cars. If you assume perfect competition on each of these markets, which of the
    trade policies will you suggest? Please explain
    4. During the annual meeting of the International Monetary Fund and World Bank
    in Bali, President Joko Widodo made a speech quoting a catchphrase from the well-
    known HBO Series, Game of Thrones. He said fighting among the “great houses”
    was distracting them from the threat of an “evil winter”. “Victory or defeat in wars
    always brings the same result — destruction, It’s pointless to become the leading
    economy in a sinking world. All these troubles in the world economy, are enough to
    make us feel like saying: ‘winter is coming’”, He put it in a context of US-Sino tariff
    war that will potentially spur the global trade war. But apparently, US is only
    protecting her domestic industry from the Chinese aggressive invasion. Is it true
    there is no other choice? So will it be possible to have a middle ground? As an
    economist, what do you see from this conflict?

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