ECON1086 International Trade - Assessment Questions

SECTION A

QUESTION A.3

In the Pure Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W. If the government imposes a tariff on the imports of W then

1. Both owners of K and owners of A will benefit.
2. Owners of A will benefit.
3. Owners of K will benefit.
4. Neither owners of K nor owners of A will benefit.

(1 mark)

Explain your answer in up to 200 words and using a diagram

(4 marks)