Posted: December 30th, 2015

Explain why more Australian food going to China would increase the price of food in Australia. Include a graph in your answer.

Question 3
This question is on international trade.

a) Explain why more Australian food going to China would increase the price of food in Australia. Include a graph in your answer.

b) Construct a graph of the Australian market for beef. Label the domestic equilibrium price and quantity with no international trade and with international trade.

Call these PA and QA for price and quantity, without trade (for Australia), and PT and QT for price and quantity, with trade.

Evaluate the welfare effects from moving from “no trade” to “free trade”. You should include a clearly annotated graph as in chapter 9 in the text.
(4 + 6 = 10 Marks)