PART B - Answer the following two questions with as much detail as you can (add space as necessary Q1. The world economy has become more and more interrelated and interdependent due to rapid growing international trade. i. Explain the economic arguments for free trade (10 marks) ii. Explain the infant - industry argument against free trade (10 marks) iii. Explain whether and how even the poorest, smallest, non resource-abundant countries can trade in a free-trade world. (10 marks) Q2. Let Ireland be a small country. The demand and supply of coffee is given by: D=60 - 5P and 5 = - 10 + 10P, which are represented in the diagram below. The world price of a ton of coffee is $5, and the government wishes to promote the domestic industry by imposing a subsidy of $2 per ton exported. p D S LU 20 25 35 40 45 60 i. What is the domestic price and quantity exported in a situation of free trade? (6 marks) ii. What is the domestic price and the quantity exported after the government imposes the subsidy? (6 marks) iii. How will the consumer surplus and the producer surplus change as a result of the export subsidy? (6 marks) iv. What is the cost of the subsidy for the government? (6 marks) v. Calculate the deadweight loss. (6 marks)