International Economics Exam Questions and Case Studies

This document presents a collection of exam questions and case studies centered around international economics. The questions delve into critical topics such as the benefits and costs of a single currency (Euro), the impact of transport costs on trade, and the differences between tariffs and quotas. Further questions explore the theory of absolute advantage, the labor theory of value, and the effects of economic integration on various stakeholders. The case studies examine real-world scenarios, including foreign retailers in India, automotive battery recycling in Mexico, the rise of the Indian pharmaceutical industry, China's restrictions on rare earth metal exports, and Apple's iPhone manufacturing and outsourcing. These cases provide practical applications of the economic principles discussed in the questions, offering a comprehensive overview of international business and economic concepts. The provided references support the information presented.

EXAM QUESTIONS 1
Exam questions
Name
Professor
Unit
Date

EXAM QUESTIONS 2
Question 1
Establishment of the Euro as a single currency will lower transaction costs incurred while
changing currency, create price transparency, and eliminate exchange rate uncertainty. Besides, a
single currency also facilitates transparency in the pricing of goods and also boost the expansion
of markets across different countries (Delavan et al., 2017 p. 32).
The cost of a single currency includes; the cost of operation used in system adjustment towards
the adopted money and the cost incurred in redefining competition and in the emergence of
specific risks.
Question 2
Transport costs can eliminate trade since an increase in the cost of transport will lead to an
increase in the cost of goods. Excessive increase in this cost will at certain levels make the trade
unpractical hence its elimination.
Multinational corporations will go for direct foreign investment instead of licensing local firms
to protect the quality of their products. (Hopkin & Blyth, 2019 p.76) .Also, these firms will earn
higher income since they will avoid division of revenue with the local firms, which would be
transacting on their behalf.
Question 3
The main difference is that tariff works through prices while quotas restrict quantity. The effects
of tariff and quota differ in that while both reduce the volume and increase the rate, in tax, the
government gathers revenue in the quantity of the tariff time’s quantity sold (Etro, 2015 p.87).

EXAM QUESTIONS 3
Falling barriers to international trade do not destroy manufacturing jobs in first world countries,
and on the contrary, it promotes business hence promoting manufacturing. Goods produced in
one country can be transported to the other country without much delay as there are no many
bounder limitations.
Question 4
The theory of absolute advantage explains the ability of one firm to have a higher production of
goods or services than the competitors.
A country with no absolute advantage can benefit in trade by specializing in the production of
goods which the competitors with Absolut advantage don't have hence ensuring it remains
relevant in the business. Such countries can work towards the production of farm exports while
those with absolute power dwell in the manufacturing sector (Timmer. et al 2015 p.103).
Question 5
Labour theory of value explains the economic importance if a product is set by the total amount
if required labor in the production. This theory assumes that the amount of work needed for the
production of certain goods and products will finally affect the value of these goods; hence it's
true.
Differences in opportunity costs of production enable a country to produce goods at a lower price
due to the low cost of labor and production (Los. et al 2015 p.77). Products manufactured at a
lower cost will often be cheap hence encouraging other countries to buy goods from them.
Question 6

EXAM QUESTIONS 4
The shift to an integrated global economy will give the consumer a wide variety of markets, to a
worker the change will increase his salary do a high cost of production and to the company the
shift will increase revenues. On the other hand, the transformation will cause an increase in
environmental pollution.
Countries engage in economic integration to obtain goods and services they cannot produce
locally.
Question 7
Free trade refers to the reduction of trade barriers in imports and exports between two or more
countries (Kshetri, 2017 p.108).
Falling barriers to international trade do not destroy manufacturing jobs in first world countries;
on the contrary, it promotes trade hence promoting manufacturing. Falling walls facilitate the
export and import of goods; this ensures more products and raw material move in and out of the
country; therefore, increasing manufacturing rates in different countries (Lakkakula. et al 2015
p.10).
Question 8
A multinational corporation (MNC) exists due to a lower cost of production, avoidance of tariffs,
and proximity to the global target market.
Multinational corporations will go for direct foreign investment instead of licensing local firms
to protect on the quality of their products, expand its market base, and avoid sharing of revenue
(Palley, 2015 p.45)
Case study Questions

EXAM QUESTIONS 5
Oversees Retailers in India
(a) India's retail business is so disintegrated due to high levels of poverty, leading to all
uneducated people to seekers refuge in this sector, which is already fragmented to shield from
poverty and unemployment.
(b)Foreign retail investors will benefit India by improving the effectiveness of the countries
distribution system. Besides, these foreign investors will also help India by opening up cold
storage and warehouses hence leading to infrastructure improvement. Lastly, international
retailers will also keep the food processing process in a vibrant position, thus ensuring food
security (Kohli & Bhagwati, 2011 p.55).
(c)The entry of forcing investors will cause a significant jobless to a considerable Indian
population and also cause the exit of small retailers in the market. Besides, experts argued that
foreign investors would also repatriate profits hence leaving the country at a poor economic
state.
(d)Reforms of FDI regulations in India have been so difficult due to several reasons. First
opposition from politicians caused the shelving of the registration, which would allow Walmart
entry into the retail business. Besides, India considered the significant long-term effects that
could range from job losses and closing down of many retail stores. Lastly, the country had
observed the impact which Walmart had caused in terms of failure to change prices on goods
even when other retailers changed.
Automotive Battery Recycling Center in Mexico
(a)The nation’s regulation should apply to any industry in which operations are taking place.

EXAM QUESTIONS 6
(b) IF Multinational Corporation focuses on a country with week regulations, the county in
which operations are taking places faces exploitation.
(c)It is not realistic for ethical standards to establish in all countries in the world or industries
since some individuals will often feel superior and greedy hence practicing unfairness and
exploitation. (d)Companies and individuals can't share ethics since we are all governed by
different principles (Johnson, 2015 p.23).
The rise of India pharmaceutical industry
(a)The US FND opened up branches in India to oversee the production of drugs Indian
pharmaceutical companies.
(b) The consumers in the US will benefit from the reduced cost of drugs, which will also reduce
insurance costs.
(c)China will have lost its drug market due to rise of Indian drug companies (Kohli & Bhagwati,
2011 p. 98).
(d)The theory of absolute advantage explains at a great extent India’s rise as a significant
exporter of drug products.
China limits the export of rare earth metals
(a)The local Chinese manufacturing industry benefited most by china, imposing an extra quota
on the export of more precious earth metals.
(b)The domestic manufactures were given a vast cost advantage as they could produce goods not
produced by other countries.
(c) The extra quota resulted in increased quality and a rise in environmental standards.

EXAM QUESTIONS 7
(d)Countries such as the US, Australia, and Canada should reconsider their environmental
restriction towards the mining of rear earth metals to sustain their local companies in the
production of goods, taking into consideration that China stopped the exportation of these
metals( Areddy & Yap, 2012 p.12).
(e)The decision by other companies such as Toyota, Renault, and Tesla to use different materials
in the manufacturing of motor vehicles is the right decision since this will help in environmental
conservation to a very significant extent.
Making an Apple IPhone
(a)The benefits of Apple outsourcing its assembly point to china are; it was easier to hire
engineers, and the factories are structured together hence easy to get components. The potential
cost brought about by the outsourcing is the price of hiring employee's risks surrounding apple is
poor employee working conditions.
(b)The engineers and companies in China are some of the major beneficiaries, while German,
Japan, and Korea are the major losers (Duhigg & Barboza, 2012 p.10).
(c)Ethical issues in apple outsourcing are the increased conflict between its executive and those
of Foxcom. Apple should resolve these issues timely to avoid the production breakdown.
(d)The kind of outsourcing is wrong for the American economy since most of the finical
resources are deprived of America into China, besides it also leads to unemployment in the US.

EXAM QUESTIONS 8
References
Delavan, M.G., Valdez, V.E. and Freire, J.A., 2017. Language as whose resource? When global
economics usurp the local equity potentials of dual language education. International
Multilingual Research Journal, 11(2), pp.86-100.
Hopkin, J. and Blyth, M., 2019. The global economics of European populism: growth regimes
and party system change in Europe (The Government and Opposition/Leonard Schapiro Lecture
2017). Government and Opposition, 54(2), pp.193-225.
Etro, F., 2015. The economics of cloud computing. In Cloud Technology: Concepts,
Methodologies, Tools, and Applications (pp. 2135-2148). IGI Global.
Timmer, M.P., Dietzenbacher, E., Los, B., Stehrer, R. and De Vries, G.J., 2015. An illustrated
user guide to the world input–output database: the case of global automotive production. Review
of International Economics, 23(3), pp.575-605.
Los, B., Timmer, M.P. and de Vries, G.J., 2015. How global are global value chains? A new
approach to measure international fragmentation. Journal of regional science, 55(1), pp.66-92.
Kshetri, N., 2017. The economics of the Internet of Things in the Global South. Third World
Quarterly, 38(2), pp.311-339.
Palley, T.I., 2015. The theory of global imbalances: mainstream economics vs structural
Keynesianism. Review of Keynesian Economics, 3(1), pp.45-62.
Lakkakula, P., Dixon, B.L., Thomsen, M.R., Wailes, E.J. and Danforth, D.M., 2015. Global rice
trade competitiveness: a shift‐share analysis. Agricultural Economics, 46(5), pp.667-676...
Areddy, J.T. and Yap, C.W., 2012. China Raises Rare-Earth Export Quota. Wall Street Journal.

EXAM QUESTIONS 9
Kohli, R. and Bhagwati, J., 2011. Organized retailing in India: Issues and outlook. Columbia
Business School Research Paper, (12/25).
Johnson, v. 2015...Automotive Battery Recycling Center in Mexico. The New York Times,
December 9, 2011 August 30, 2011.
Duhigg, C. and Barboza, D., 2012. In China, human costs are built into an iPad. New York
Times, 25.