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.