BEFORE ANSWERING THE QUESTIONS IN THIS PAPER, PLEASE READ THE CASE STUDY PROVIDED
Question 1 (7 Marks)
- The top 10 trading partners with the United States of America in 2012 were also the 3 largest European economies: Germany, the United Kingdom, and France. Use the Gravity Model to examine the reasons why the United States of America would not trade more with Guatemala but trades more with distant countries such as Britain and European Union countries mainly Germany and France. 3 marks
- Carbonated water was teamed with the new syrup to produce a drink that was once "Delicious and Refreshing", a theme that continues to echo today wherever Coca-Cola is enjoyed. Following the case study provided to you, consider the countries with the highest consumption of Coca Cola. Examine the factors that explain the changing pattern of trade in Coca Cola since 1886. 4 marks
Question 2 (11 marks)
Assume in order to increase the export of Coca Cola produced in Mexico to neighbouring countries the Government of Mexico decided to provide export subsidies to Coca Cola and farmers. Use the figure below to answer the questions that follow.
- Do you think Mexico would benefit after providing export subsidies to farmers and Coca Cola producers? 7 marks
- Suppose USA provided export subsidies to Coca Cola producers and farmers. Examine the effects of export subsidies on importing countries. 4 marks
Question 3 (7 Marks)
International trade can be explained by a number of models to explain the benefits of trade for nations. Use the case study provided to you to answer the questions that follow.
- Examine the relevance of the following theories to explain the reasons why Coca Cola and other multinational enterprises trade internationaly.
- Absolute Advantage 2 marks
- The Ricardian Model 1 mark
- The Heckscher-Ohlin Model 1 mark
- Examine the differences between the theory of Absolute Advantage and Comparative advantage. 1 mark
- Explain the main disadvantages of the theory of comparative advantage. 2 marks
Question 4 (7 Marks)
The bulk of Coca Cola employees in USA are Mexican migrants. Explain the effects of migration on both Mexico and USA. Use the figure below and the marginal product of labour concept to explain your answer.
Question 5 (11 marks)
“Despite the competition, internal economies of scale and external economies of scale as well as economies of scope is the secret behind Coca Cola success”. Assume a world of two nations. Also, assume Mexico exports Coca Cola to USA. Answer the questions that follow.
- Examine the source of internal economies of scale and external economies of scale that have facilitated Coca Cola to overcome the intense competition from a diversity of soft drinks across the world. 4 marks
- In 2019 data indicated that Mexico was the highest consumer of Coca Cola in the world with a total consumption of 634 8-ounce cups followed by USA that consumed 403 despite being the headquarters of Coca Cola. Use the diagram below to answer the questions that follow.
- Name and explain what you understand by curves A and B. 2 marks
- Explain the role of external economies of scale in faciliting cross border trade between Mexico and USA. 5 marks
Question 6 (7 Marks)
- In order to promote freer trade, World Trade Orgainisation member countries have intensified negotiations as a means of promoting enterprises to trade internationally. Examine the benefits of trade negotiation to a firm such as Coca Cola. 3 marks
- The rise of Japan provides the best experience to explain the economic growth of countries through infant protection. In order to follow the Japanese experience, many developing countries have adopted import tariffs as a tool for protectionism. Use the figure below to examine the effects of protectionism on non-alcoholic bevarages for a nation such as Mexico. 4 marks
END OF FINAL ASSESSMENT