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Problem 1:
i) To what extent can a country actually rely on the principle of Comparative advantage before engaging in international trade?
ii) Explain the different types of barriers that exist to trade.
iii) Why should a country protect its domestic firms?
Problem 2:
i) Why should the government intervene in the production of merit and demerit goods?
ii) What would you consider as the main failures of a market economy? How are such failures normally dealt with?
iii) Given that government intervention is not always beneficial, comment on its potential limitations.
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