Question 1

In the following examples, do you believe that the main driving force for the location of production is economies of scale or comparative advantage:

1. The presence of two automotive companies, Volvo and Saab, in Sweden.
2. The presence of a textile industry in Bangladesh.
3. The large number of coffee growers in Tanzania and Kenya on the slopes of Kiliman-jaro.
4. That 70% of all lighters in the world are produced in the Chinese city of Wenzhou.
5. The many nightclubs around Stureplan in Stockholm compared to, for example, Grdet.

Question 2

Imagine that Vietnam would close its trade in buttons with other countries. Would prices in Vietnam increase or decrease? (Hint: this depends on the size of the Vietnamese domestic demand).

Question 3

Assume that Vietnam maintains free trade in buttons but that its current output in this industry is zero due to competition from China. Now, the Vietnamese government decides to subsidise its button industry (this causes Vietnam's supply curve to shift downwards). Will this be successful?