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Agec 434: Agriculture And International Trade Question Paper
Agec 434: Agriculture And International Trade
Course:Bachelor Of Agribusiness Management
Institution: Chuka University question papers
Exam Year:2012
CHUKA UNIVERSITY
COLLEGE
UNIVERSITY EXAMINATIONS
FOURTH YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF AGRIBUSINESS MANAGEMENT
AGEC 434: AGRICULTURE AND INTERNATIONAL TRADE
STREAMS: AGBM Y4S2 TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 8.30 A.M – 10.30 A.M.
INSTRUCTIONS:
1. Answer question One and any other two questions.
2. Do not write on the question paper.
QUESTION ONE:
(i) The following table shows the hours of labour required to produce 1 unit of each commodity in each country.
Wheat Clothing
United States 3hr 9hr
Kenya 4hr 4hr
There are many theories to explain why international trade exists.
(a) Explain clearly which country has absolute advantage of each commodity. Illustrate your answer. [4 marks]
(b) If trade takes place between the United States and Kenya at barter price of 1 clothing to 2 wheat (or 1 wheat for ½ clothing), why does each country gain
from trade? Explain. [6 marks]
(ii) (a) Explain why existence of international trade is better explained by
comparative advantage rather than absolute advantage theory. [4 marks]
(b) In a Ricardian Model, suppose that the United States can produce 1 unit of
wheat in 3 days of labour time and 1 unit of clothing in 4 days of labour time. What is the autarky price ratio in the United States? [3 marks]
If the world price ratio (term of trade) is 1 wheat: 1 clothing, which good will the United States export and which will it import? Why? [3 marks]
(iii) (a) Use a diagram to defend this statement. “The greater the difference between
the terms of Trade and prices under autarky, the greater the gain from trade.
[4 marks]
(b) There are many types of trade restrictions that are used by different
countries/governments to control trade. Giving examples discuss the following:
(i) Government procurement provisions [2 marks]
(ii) Domestic content provision [2 marks]
(iii) Trade related investment measures (Trims) [2 marks]
QUESTION TWO:
(i) What is your understanding of international marketing? [2 marks]
(ii) Discuss the major challenges faced by firms in international marketing. [4 marks]
(iii) Explain how international trade can stimulate change in the economic system in the dynamic sense. [6 marks]
(iv) Discuss why developing countries have greater problems with export instability than industrialized countries. [4 marks]
(v) Giving an example distinguish between foreign direct investment and foreign portfolio investment. [4 marks]
QUESTION THREE:
Discuss, giving practical examples the reasons for capital movement across countries.
[20 marks]
QUESTION FOUR:
(i) Explain the following terms:
(a) Credit items in the balance of payments accounts.
(b) Debit items in the balance of payments accounts. [4 marks]
(ii) Discuss four types of economics integration that aim to raise or lower trade
barriers. [8 marks]
(iii) Suppose country A is considering forming a customs Union with country B. Country A produces only manufactured goods and imports all its raw materials and agricultural products. Country B produces only raw materials and agricultural products and imports all its manufactured goods. Remembering the concepts of trade creation and trade diversion, is this union likely to be welfare enhancing? Explain why or why not. [8 marks]
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