Problem 1:

(a) Clearly distinguish between the theories of Comparative and Absolute advantage of trade (you are expected to use examples to illustrate your answer).

(b) According to you, how far do these theories still illustrate the behavior of trade around the world? What other theory/theories come closer to explaining the pattern of current world trade behavior?

Problem 2:

a) Describe, with the use of diagrams, the difference between a tariff and a quota.

b) Over the recent years, domestic support in agricultural trade has become a significant issue in international trade negotiations. Explain how subsidies in agricultural trade is trade-distorting.