International Trade

International Trade

1. Graphs and equations MAY be drawn by hand. When drawing diagrams, clearly and accuratelylabel all axis, lines, curves, and equilibrium points.

2. Explanations MUST be legibly written. Your explanations should be succinct and to the point. Illegible or incoherent explanations will earn you zero points.

During the first part of the course in which we focus on international trade theory, we will make use ofseveral models(The Ricardian Model, The Heckscher-Ohlin Model,

Specific Factors Model, the Standard Trade Model) to explain the ways in which patterns of trade may develop and the gains from trademay be captured by participating

countries. In doing so, we introduce and discuss many simplifyingassumptions made in these models. We contend that these assumptions are indeed merely simplifyingand

that if they were to be relaxed the results of the model would not fundamentally change so as tomake their theoretical contributions moot.

Your task in this exercise is to scrutinize each of the assumptions made and determine whether they arereasonable enough and not over-restrictive for the purpose of

conveying the theoretical argument theymake and the conclusion they reach. In any of the assumptions from any of the models that we cover, inthe event that you find

that they are unreasonable or significantly flawed in the extent of theirrestrictiveness so as to put the model’s contribution into question, please identify and state

theassumption. In no more than 500 words, explain in detail for why you believe that the assumption(s)you refer to does not muster this scrutiny.An explanation merely

noting that the assumptions do notreflect real world circumstances is unlikely to get any credit. In the printout of the essay, make sure to indicate the number of

words used

Reference (Textbook): International Economics Theory & Policy 9th edition, KrugmanObstfeldMelitz

Chapter 1-6


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