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Name: PHẠM QUANG ANH Roll number:

Room No: Class: IB16102

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ECO121_Test 01_Individual Assignment 01

Question1. (2 points)

1. a. What is defined as absolute advantage?

b. What is defined as comparative advantage?
c. Case 1: Output approach
Two commodities and two countries
Given the resources, Singapore and Malaysia can produce the following products –
television sets and cars (see Table 01)
Countries TV sets Cars (units)
Singapore 100 50
Malaysia 60 40
Table 01
+ Which country has the absolute advantage in the production of both TV sets and
Cars over the other?
+ Which country has the comparative advantage either in the production of TV sets or
in the production of Cars over the other?
d. Case 2: Input approach
Two commodities and two countries
Give the resources, America and England can produce one unit for both Steel and Coal
in terms of number of working hours shown as follows:
Countries One unit of Steel One unit of Coal
required required
America 80 man-hours 90 man-hours
England 120 man-hours 100 man-hours
Table 02
+ Which country should specialize in the production of Steel?
+ Which country should specialize in the production of Coal?
e. Case 3: Input approach
Two countries but multiple commodities
 The following Table 03 shows the numbers of man – days taken to produce an
equivalent amount of six commodities in each of the two countries – Switzerland and
Sweden.
Countries Coal Cotton Wool Iron Wheat Maize
Switzerland 120 60 70 100 140 80
Sweden 100 25 35 90 90 20
Table 03
+ Assuming that there are no other costs of production. Which two commodities is
Sweden most likely to import from Switzerland?

Question 2 (3 points):
Suppose there is an economy that produces only two goods: tequila and peyote. In 2008, the
economy produced 100 litres of tequila and 200 peyote plants. The unit prices (per litre or per
plant) in 2008 were $100 and $500. 1000 people were employed in the tequila sector, and the
peyote sector employed 500.

In 2009, the weather was particular sunny and hot, which is good for tequila production but
bad for the cultivation of peyote. As a result, the economy produced 120 litres of tequila but
only 191 peyote plants in 2009.

The tequila and peyote sold for $90 per litre and $550 per plant that year. 1100 people were
employed in the tequila sector, while only 450 people worked in the peyote sector.

Answer the following questions:

a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?
b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base year?
What is the percentage change?
c. How much is the GDP deflator in the two years? By what percentage does the price
level change from the base year to 2009?
d. What was the growth rate of average labour productivity for the whole economy
between 2008 and 2009?

Question 3 (2 points)
In the country of Kwaki, people produce canoes, fish for salmon, and grow corn. In one year
they produced 5000 canoes using labor and natural materials only, but sold only 4000, as the
economy entered a recession. The cost of producing each canoe was $1000, but the ones that
sold were priced at $1250. They fished $30 million worth of salmon. They used $3 million of
the salmon as fertilizer for corn. They grew and ate $55 million of corn. What was Kwaki's
GDP for the year?

Question 4. (3 points)
+ What are the benefits/gains from international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade relations

+ What are the disadvantages of international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade relations
Q1:
a. Absolute advantage: the ability to produce a good using fewer inputs than another
producer
b, Comparative advantage: the ability to produce a good at a lower opportunity cost
than another producer
c, + Singapore has the absolute advantage
+ Malaysia has the comparative advantage
d, + America specialize in the production of Steel
+ England specialize in the production of Coal
e, Sweden is most likely to import two commodities from Switzerland:
cotton and maize

Q2:
a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?
GDP 2008 = 100 × $100 + 200 × $500 = $110000
GDP 2009 = 120 × $90 + 191 × $550 = $115850
%∆GDP = (115850 – 110000) : 110000 ≈ 5.32%
b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base year? What is
the percentage change?
GDP 2008 = 100 × $100 + 200 × $500 = $110000
GDP 2009 = 120 × $100 + 191 × $500 = $107500
%∆GDP = (107500 – 110000) : 110000 ≈ −2.27%
c. How much is the GDP deflator in the two years? By what percentage does the price level
change from the base year to 2009?
GDP deflator 2008 = 1
GDP deflator 2009 = 115850 : 107500 = 1,077
%GDP = (1 – 1.077)x 100 = 7.7%
d. What was the growth rate of average labour productivity for the whole economy between
2008 and 2009?
The average labour productivity in 2008 = 110000 : (1000+500) = $73.33/worker
The average labour productivity in 2009 = 107500 : (1100+450) = $69.35/worker.
The growth rate = 69.35−73.33 73.33 = −5.43%.

Q3:
Canoes in inventories: 1000 x $1000 = $1.000.000
Canoes sold: 4000 x $1250 = $5.000.000
Salmon: $30.000.000 - $3.000.000 = $27.000.000
Corn: $55.000.000
GDP = $1.000.000 + $5.000.000 + $27.000.000 + $55.000.000 = $88.000.000

Q4:
+ What are the benefits/gains from international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade
relations
By engaging in international specialization and division of labor, international commerce
allows national resources to be utilised more efficiently. International commerce boosts
production capacity and raises living standards in individual countries as well as the entire
world. International trade increases consumption, manufacturing expansion, knowledge
transfer, and investment across countries, laying the groundwork for nations' economic
progress.
Most countries now regard international trade to be the most essential aspect in their
economic growth programs and objectives. The process of trade liberalization progresses as
international trade expands. It is clear that international commerce advantages developed
nations with advanced technical levels and well-organized production systems, allowing
them to be highly competitive in all four dimensions: firm, product, industry, and country.
International trade can only assist emerging and less developed nations if they have the
necessary and adequate economic integration plans in place; they must know how to take the
initiative and reap the advantages, as well as how to mitigate the negative effects of
international trade.
Nowadays, Vietnam has reaped the static benefits of specialization and greater exports from
its current comparative advantage, but has yet to reap the long-term dynamic benefits,
particularly the development of new goods. driving force for innovation and creativity,
utilizing internal resources to advance to higher value-added positions in the global supply
chain. Meanwhile, multilateral trade, which is based on well-established core principles and a
liberal and open policy approach, is being challenged by a foreign country's nationalist and
protectionist ideas. This will be a big challenge for Vietnam, a country with a trade scale
(export and import) nearly twice as large as gross domestic product (GDP). International
trade has made Vietnam one of the economies with a large openness and trade relations with
over 230 markets, thereby creating favorable conditions for Vietnamese businesses to expand
market access. This is an opportunity for Vietnam to connect and participate more deeply in
the global value chain and production network. Grasping that importance, Vietnam knows it
must focus on 3 factors. First, concentrate on strengthening international integration
capability, which includes distributing information and creating international integration
awareness in the political system, branches, localities, business community, and the whole
globe. society. Effectively execute the Action Plan for the Implementation of Newly Enacted
Free Trade Agreements. Second, hasten the publication of documentation describing how to
put successful laws, ordinances, and resolutions into effect. Focus on revising, augmenting,
and promulgating new legal texts that are consistent with international obligations. Third,
continue to push the envelope in terms of settling administrative procedures for individuals
and businesses. Publicity and openness of management actions have resulted in significant
improvements in state management efficiency and effectiveness. Encourage the rapid growth
of e-commerce and the integration of e-commerce with traditional commercial activity.
Improve market management and inspection, as well as the prevention and detection of
smuggling and commercial fraud.

+ What are the disadvantages of international trade? Write an essay with 500 words and
provide your answers with real example in the context of Vietnam international trade
relations

No one can deny the benefits of international commerce in theory. In practice, though, the
opposite side of the equation cannot be overlooked. Some countries, particularly those in the
early stages of industrialization, have had a traumatic experience with international
commerce.
The elimination of handicrafts and cottage industries is the worst consequence of
international commerce on developing countries. Such industries had advanced to a high
level of perfection in India. However, a rush of low-cost British goods drove them aside. The
trader is followed by the empire-builder. Traders acquire a footing, which is then exploited to
complete a country's political enslavement. Dependence on foreign commodities causes
problems during times of conflict when the country is cut off from the rest of the world by
enemy activity. During the battle, poor countries had a hard time procuring basic items like
needles, tools, and medications. Extreme specialization, which reduces a country's reliance
on just one or two industries, is a bad thing. Putting all one's eggs in one basket is a bad idea.
The people's economic well-being would be jeopardized if a substitute is developed or the
industry suffers in any other way.
Vietnam is still a developed country, it will inevitably have to rely on larger countries, and
this reliance, like the French colonial period, is slowly destroying Vietnam. We are more
reliant on the Chinese economy because of the size and level of growth of China's economy,
which has resulted in Vietnam having a trade imbalance with China and being a receiver of
Chinese FDI, among other things. Not only that, but Vietnam is also reliant on the present
international order: according to dependency theory, many nations find it difficult to break
free from the capitalist international division of labor, which keeps Vietnam in the periphery
and at the bottom of the value chain. This is the structural cause of the "middle-income trap"
and the "race to the bottom" phenomena, in which less developed nations compete with
wealthy countries for investment and trade, with the effect that the more integrated, the
poorer they become.
The issue is, what are Vietnam's new competitive advantages? In terms of dependence
reduction, the task of creating a new list of comparative advantages for Vietnam in the new
context, especially when the current comparative advantages have not yet taken effect, or
gradually lose value, is the task of creating a new list of comparative advantages for Vietnam
in the new context. This is a long-term (structure, development model) as well as a short-
term issue. At the same time, these are concerns that will require greater attention in the
future, first and foremost from a theoretical standpoint, in order to successfully manage the
interplay between autonomy and proactive integration. most efficient, adjusting at the highest
level to the fast-changing global and regional environment