Question

1) India has a comparative advantage in service exports for all the following reasons, except:

Group of answer choices:

a) India is 12 hours ahead of Eastern Standard Time, which makes it easier to offshore some jobs.

b) India has a large number people who are educated and conversant in English.

c) Indians are closer to Americans for historical reasons, and therefore the two countries like to trade with each other.

d) service sector jobs do not require massive infrastructure investment.

2) Suppose that the world price of steel is $500 per ton. Now suppose that the United States imposes a 20% tariff on imported steel (as it did in 2002). What is the U.S. domestic price of steel after the 20% tariff is imposed (rounded to the nearest dollar) if exporters bear two-thirds of the tariff?

Group of answer choices:

a) $567

b) $467

c) $533

d) $433

Answer 1

1.

Service secor job do not require massive infrastructure investment. Also, India is 12 hours ahead of EST, this makes it easy to offshore some jobs. Indians are good at English. All the three reasons seems to add on to the comparative advantage that India has in service exports.

So, option c looks a good answer choice.

2.

World steel price = 500

Tariff = 20% i.e. 20% of 500 = 100

Exporters bear 2/3 of tariff i.e. 2/3 of 100 = 67 (rounded off to nearest)

So the price of steel becomes 500 + 67 = 567 (Option A)