1). Tanzania and Germany
Tanzania has risen from low to a middle-income country in recent years. Tanzania relies on tourism, agriculture and lots of labor intensive low productivity activity for their economy. I had a doctoral student from Tanzania in my Development Economics class in 2018 who was convinced that trade played a positive role in their rise in income.
a). Explain how the logic of comparative advantage would provide Tanzania the possibility of benefitting from trade with Germany (more productive in most everything)?Provide a hypothetical example with some numbers. You may simply provide the classic 2 goods, 2 countries Ricardo model assuming that goods move between countries, inputs move within countries and both countries before trade enjoy and produce both goods.
b). More broadly, explain all the ways that Tanzania might benefit from this international trade Be sure to detail how trade can and should increase the productivity of Tanzania as well as detailing any other possible benefits of trade.
c). Mention a couple of the pitfalls or dangers that a low income country might face from exposing themselves to more trade.
d). Graphically show and explain changes consumer surplus, producer surplus, government revenue and dead weight loss from the removal of a tariff. (assume that the international price is lower than the domestic price).