ECON6023 International Trade
The Complete Exam Bible · S1 2027ECON6023 Overview
- University of Sydney
- S1 2027
- 12 chapters
- Economics
ECON6023 International Trade is a University of Sydney postgraduate (Master's) unit of study in the School of Economics, worth 6 credit points and taught at graduate level (it presumes advanced undergraduate microeconomics). It runs in two arcs.
- Assessed by In-class quiz 1 10% · In-class quiz 2 10% · Mid-semester test 30% · Final exam 50%
- Key terms Comparative advantage, Autarky relative price, CES demand, Stolper-Samuelson theorem
- How to prepare Treat ECON6023 as a set of derivations you must be able to reproduce cold, not a reading unit.
- Most asked Where can I find past exam papers / practice for ECON6023?
How ECON6023 is assessed
| Component | Weight | Format |
|---|---|---|
| In-class quiz 1 | 10% | Week 5 · 45 min · closed book · in class |
| In-class quiz 2 | 10% | Week 10 · 45 min · closed book · in class |
| Mid-semester test | 30% | Week 8 · in person · 1 hour · closed book |
| Final exam | 50% | Formal exam period · 2 hours (+10 min reading) · closed book · 3 questions |
What ECON6023 covers
ECON6023 runs across a 13-week semester, building from world trade patterns and comparative advantage through the neoclassical models (Ricardian, DFS, specific factors and Heckscher-Ohlin) to new trade theory and trade policy. Progress is checked by two in-class quizzes (Weeks 5 and 10) and a mid-semester test (Week 8), then consolidated in a 2-hour closed-book final exam worth 50%.
Each chapter below maps to the unit's real teaching week and to the derivations you must be able to reproduce.
World Trade and the Idea of Comparative Advantage
gravity, gains from trade, why countries trade · (Week 1)Week 1 opens ECON6023 with the central puzzle of the unit — why a country imports goods it could make itself — and answers it with comparative rather than absolute advantage, the gains from trade and the production-possibility frontier.
- Scale and pattern of world trade; the gravity relationship (trade rises with size, falls with distance)
- Absolute advantage (lower unit labour requirement aᵢ) vs comparative advantage (lower opportunity cost)
- Opportunity cost of good 1 in terms of good 2 = a₁/a₂ = slope of the PPF = autarky relative price
- Reading a unit-labour-requirement table: assigning AA and CA; a country can have AA in both yet CA in only one
- The world relative-price band: the free-trade price must lie between the two autarky relative prices
- The straight-line Ricardian PPF and constant opportunity cost
The Ricardian Model of Comparative Advantage
one input, PPF, real wages, specialisation · (Week 2)Week 2 builds the full 2×2 Ricardian model — labour the only input, straight-line PPFs, unit labour requirements — and derives autarky prices, the specialisation pattern and real wages in autarky and at the trade equilibrium.
- Assumptions: two countries, two goods, labour the only factor, constant returns, perfect competition, immobile labour across countries
- Production Qᵢ = Lᵢ/aᵢ and full employment a₁Q₁ + a₂Q₂ = L; the straight-line PPF
- Perfect-competition pricing pᵢ = aᵢ·w, so the autarky relative price = a₁/a₂
- Real wage w/pᵢ = MPLᵢ = 1/aᵢ (in terms of the good produced at home)
- Complete vs incomplete specialisation and the world relative-price range
- The real-wage gain from trade: w/p in terms of the imported good rises above its autarky value
The Dornbusch-Fischer-Samuelson Continuum Model
A(z) efficiency curve, marginal good z-prime, B(z-prime) · (Week 3)Week 3 extends Ricardian logic to a continuum of goods z ∈ [0,1], replacing the price band with two curves: the downward-sloping relative-efficiency curve A(z) = a*(z)/a(z) and the upward-sloping trade-balance curve B(z'), whose intersection gives the marginal good z' and the relative wage ω = w/w*.
- Continuum of goods z ∈ [0,1], one factor (labour), endowments L and L*, unit labour requirements a(z), a*(z)
- Goods reordered so Home's comparative advantage is decreasing in z (Home makes low-z goods)
- Relative-efficiency curve A(z) = a*(z)/a(z), downward sloping
- Marginal good z': w·a(z') = w*·a*(z') ⟺ ω = w/w* = A(z'); Home makes [0, z'], Foreign makes [z', 1]
- Cobb-Douglas continuum preferences U = ∫₀¹ ln c(z) dz: uniform expenditure share across goods
- Trade-balance curve B(z'): wL = z'(wL + w*L*) ⟹ ω = [z'/(1−z')]·(L*/L), upward sloping
The Specific-Factors Model (Short Run)
wage-rental diagram, income distribution · (Week 4)Week 4 develops the short-run model where labour is mobile between two sectors but each sector has its own immobile specific factor (capital, land), so a change in relative prices redistributes income.
- Setup: labour mobile between two sectors; each sector has its own specific factor (capital, land); short run
- Labour-market equilibrium W = P_M·MPL_M = P_A·MPL_A; the back-to-back p·MPL diagram
- Diminishing MPL and the bowed-out (concave) PPF with slope −P_M/P_A
- A rise in P_M: labour moves into M, wage rises by less than the price (ΔW/W < ΔP_M/P_M)
- Real wages: W/P_M falls, W/P_A rises → the mobile factor's welfare is ambiguous
- Magnification chain ΔR_T/R_T < 0 < ΔW/W < ΔP_M/P_M < ΔR_K/R_K (for a rise in P_M)
The Heckscher-Ohlin Model (Long Run)
HO theorem, Stolper-Samuelson, Rybczynski · (Week 5 · Quiz 1)Week 5 introduces the long-run two-factor model built on factor abundance and factor intensity, and its four theorems — Heckscher-Ohlin, Stolper-Samuelson, Rybczynski and factor-price insensitivity.
- Assumptions: two factors (labour, capital) both mobile long run; factor intensity; factor abundance; identical technology and homothetic tastes
- Factor intensity (L_s/K_s > L_c/K_c) and factor abundance (L*/K* > L/K) defined at a common wage-rental ratio
- Heckscher-Ohlin theorem: a country exports the good using its abundant factor intensively
- Stolper-Samuelson theorem: a rise in a good's relative price raises the real return of its intensive factor, lowers the other's
- Rybczynski theorem: at fixed prices, more of a factor raises the output of the industry using it intensively, lowers the other
- Factor-price insensitivity: endowment changes are absorbed by the output mix with factor prices unchanged (inside the cone)
Movement of Labour and Capital: Migration and FDI
immigration, FDI, gains to source and host · (Week 6)Week 6 applies the short-run specific-factors and long-run Heckscher-Ohlin frameworks to the international movement of factors — immigration and foreign direct investment — rather than to goods trade.
- Immigration short run (specific factors): widen the labour box → wage falls, both sectors' output rises, both specific rentals rise
- Immigration long run (Heckscher-Ohlin): Rybczynski output change with wage and rental unchanged (factor-price insensitivity)
- Foreign direct investment as movement of capital; greenfield investment; the ≥10% ownership definition
- FDI short run: capital inflow raises the wage, lowers the rental on capital, raises output of the receiving sector
- FDI long run: extra capital raises the capital-intensive industry's output (Rybczynski), factor prices unchanged
- The rental benchmark R = P_K(i + d) (price of capital × [interest rate + depreciation])
Krugman's Monopolistic-Competition Model
love of variety, markup, free entry, gains from trade · (Week 7)Week 7 moves to new trade theory: monopolistic competition with love of variety and increasing returns from a fixed cost.
- Monopolistic competition: many firms, each a unique variety, free entry, zero long-run profit
- Love of variety and increasing returns from a fixed cost: labour l = α + βy
- CES preferences U = (Σ cᵢ^ρ)^(1/ρ) with ρ = (σ−1)/σ; demand cᵢ = (I/P)(pᵢ/P)^(−σ)
- Firm output yᵢ = L·cᵢ and profit π = pᵢyᵢ − w(α + βyᵢ)
- Constant markup p = wβ·σ/(σ−1) over marginal cost wβ
- Free-entry / zero-profit condition and equilibrium firm size y = α(σ−1)/β (independent of L)
Offshoring and Global Production
trade in intermediate inputs, wages, job polarisation · (Week 9)Week 9 studies offshoring — trade in intermediate inputs and the slicing of the value chain across countries — and its effect on the relative demand for skilled versus unskilled labour, relative wages and job polarisation.
- Offshoring / foreign outsourcing = producing stages of a good in different countries (trade in intermediate inputs)
- The value chain ranked by skill intensity, from assembly (least skill-intensive) to R&D (most)
- Assumptions: low-skill relative wage lower in Foreign; capital and trade costs uniform across activities
- The cutoff on the value chain: Foreign does the least skill-intensive activities, Home the rest
- Comparative static: a fall in offshoring costs moves the cutoff, raising skilled relative demand in BOTH countries
- Skilled relative wage rises in Home and Foreign simultaneously (the distinctive result vs simple HO)
Trade Policy I: Import Tariffs and Quotas
small vs large country, CS/PS/revenue/DWL · (Week 10 · Quiz 2)Week 10 analyses import tariffs and quotas under competitive markets, computing consumer surplus, producer surplus, government revenue and deadweight loss for a small country (a pure welfare loss) and a large country (a possible terms-of-trade gain), plus tariff-quota equivalence and the quota-under-monopoly case.
- Welfare tools: consumer surplus (below demand, above price), producer surplus (above supply, below price)
- Import demand M(P) = home demand − home supply; zero at the autarky price
- Small-country tariff: domestic price = P_W + t; areas a (PS gain), b (production loss), c (revenue), d (consumption loss)
- Small-country net welfare = −(b + d); the prohibitive-tariff check against the autarky price
- Large-country tariff: foreign price falls; net welfare = e − (b + d); a terms-of-trade gain e is possible
- Optimal tariff t* = 1/E*ₓ (elasticity of foreign export supply); prohibitive tariff reverts to autarky
Trade Policy II: Export Subsidies and Strategic Trade
export subsidies/tariffs, production subsidies, strategic trade · (Week 11)Week 11 covers export policy — export subsidies and export tariffs/quotas — and the key contrast between an export subsidy and a production subsidy (which carries a smaller deadweight loss because it does not distort consumption).
- Export subsidy, small country: home price rises to P_W + s; net welfare = −(b + d), like a small-country tariff
- Export subsidy, large country: world price falls (terms-of-trade LOSS e); net welfare = −(b + d + e), never a gain
- Production subsidy: raises the price to producers but not to consumers; deadweight loss = area c only (the targeting principle)
- Export tariff/quota: small country net welfare = −(b + d); large country can gain via terms of trade (beggar-thy-neighbour)
- Strategic trade policy (Brander-Spencer): duopoly, positive externalities/spillovers, first-mover advantage
- Game theory: payoff matrix, best responses, Nash equilibrium; multiple equilibria with large fixed costs
Trade Agreements and the Political Economy of Protection
WTO, regional trade agreements, trade and environment · (Week 12)Week 12 examines why governments protect despite the aggregate welfare cost, and how the WTO and regional trade agreements shape outcomes, distinguishing trade creation from trade diversion.
- Political economy of protection: concentrated producer benefits vs diffuse consumer costs
- GATT (1947) → WTO; Most-Favoured-Nation (MFN) principle; anti-dumping and safeguard clauses; dumping defined
- The large-country tariff game as a prisoner's dilemma: the Nash equilibrium is mutual tariffs, worse than free trade
- Multilateral institutions as a way to escape the bad tariff-game equilibrium
- Free-trade area (own external tariffs, rules of origin needed) vs customs union (common external tariff)
- Trade creation: importing from a lower-cost member a good you used to make yourself (welfare gain)
Exam Revision: Past-Paper Masterclass
worked DFS, Krugman and tariff questions · (Week 13)Week 13 consolidates the whole unit by working full past-exam questions end to end — a DFS derivation with a productivity shock, a Krugman (1980) firm-size and welfare derivation, and a large-country tariff-welfare calculation.
- The three-question exam shape: two theory derivations (Ricardian/DFS/Krugman) plus one applied trade-policy question
- Marks vary by year (for example a 25/25/10 split); budget time in proportion to marks
- Theory technique: derive CES/Cobb-Douglas demand from the Lagrangian before quoting any result
- DFS revision: intersect A(z') and B(z'), then run a comparative static (size or productivity shock)
- Krugman revision: markup → free-entry firm size → number of varieties → welfare in market size
- Trade-policy revision: small- vs large-country tariff welfare with lettered areas; the prohibitive-tariff and terms-of-trade checks
The first arc is the theory of why countries trade and who wins and loses: comparative advantage and the Ricardian model, the Dornbusch-Fischer-Samuelson (DFS) continuum-of-goods extension, the short-run specific-factors model, the long-run Heckscher-Ohlin model, factor movements (migration and FDI), and the Krugman monopolistic-competition model of intra-industry trade.
The second arc is trade policy: import tariffs and quotas, export subsidies and strategic trade, and trade agreements and the political economy of protection.
It is a derivation-heavy unit — most theory marks come from re-solving a model from its assumptions (CES/Cobb-Douglas demand via the Lagrangian, Ricardian real wages, the DFS A(z) and B(z') curves, the Krugman markup and firm size), and applied marks from working a tariff-welfare diagram with labelled areas.
Assessment, delivered through Canvas, is four pieces: two in-class quizzes (10% each, Weeks 5 and 10, 45 minutes, closed book), a 30% in-person mid-semester test (Week 8, 1 hour, closed book) and a 50% final exam (2 hours plus 10 minutes reading, closed book, three questions — two theory derivations and one applied trade-policy question).
No explicit pass hurdle appears in the available course materials, so confirm the hurdle rules, the mark split and the permitted calculator on your Canvas Assessments page and the unit outline. The ECON6023 result feeds the Weighted Average Mark (WAM) that later postgraduate economics units build on.
Worked example · free
Krugman (1980) monopolistic competition: markup, firm size, varieties and the gains from trade
- +1Demand and firm output. CES demand for variety i is cᵢ = (I/P)(pᵢ/P)^(−σ) with price index P = (Σ pⱼ^(1−σ))^(1/(1−σ)); aggregating over the L consumers, a firm sells yᵢ = L·cᵢ. Perceived demand has constant elasticity σ.
- +1Profit-maximising markup. Profit is π = pᵢyᵢ − w(α + βyᵢ). Setting marginal revenue equal to marginal cost with constant elasticity σ gives the constant markup p = wβ·σ/(σ−1). With w = 1, β = 1, σ = 2: p = 1·1·(2/1) = 2.
- +1Free entry pins firm size. Impose zero profit (free entry), p·y = w(α + βy), together with the markup to get y = α(σ−1)/β = 4·(2−1)/1 = 4. Output per firm is independent of market size L.
- +1Number of varieties. Full employment L = N(α + βy) gives N = L/(σα) = 1200/(2·4) = 150 varieties (labour per firm = α + βy = 4 + 4 = 8, and 1200/8 = 150).
- +1Gains from trade. Per-capita welfare is proportional to N^(1/(σ−1)), which here rises one-for-one with market size L. Opening to trade acts like doubling the effective market to L + L* — firm size and price stay fixed under pure CES, but the number of varieties available to each consumer doubles (to 300 in the L = L* case), and love of variety raises real income. The gain comes entirely through variety.
Key terms
- Comparative advantage
- A country has a comparative advantage in the good it can produce at the lower opportunity cost (lower autarky relative price). In the Ricardian model Home has a comparative advantage in good 1 iff a₁/a₂ < a₁*/a₂*. A country always has a comparative advantage in some good, even with an absolute disadvantage in both.
- Autarky relative price
- The no-trade relative price. Under perfect competition price equals unit labour cost (pᵢ = aᵢ·w), so the relative price of good 1 is a₁/a₂ = the slope of the (straight-line) Ricardian PPF. The free-trade world relative price must lie between the two countries' autarky relative prices.
- CES demand
- Constant-elasticity-of-substitution demand: cᵢ = (I/P)(pᵢ/P)^(−σ) with price index P = (Σ pⱼ^(1−σ))^(1/(1−σ)) and σ = elasticity of substitution. Relative demand is c₁/c₂ = (p₁/p₂)^(−σ); as the number of goods grows, the own-price elasticity tends to σ — the workhorse demand system for the Ricardian, DFS and Krugman derivations.
- Stolper-Samuelson theorem
- In the long run (Heckscher-Ohlin), a rise in the relative price of a good raises the real return of the factor used intensively in that good and lowers the real return of the other factor. Magnification: for a rise in Pc, ΔW/W < 0 < ΔPc/Pc < ΔR/R. Distinct from the short-run specific-factors result, where the effect on the mobile factor is ambiguous.
- Deadweight loss (trade policy)
- The net efficiency loss from a tariff/quota/subsidy, measured as triangle areas on the supply-demand diagram: the production loss b (home units made at a marginal cost above the world price) plus the consumption loss d. For a small country a tariff's net welfare change is −(b+d); a large country can offset it with a terms-of-trade gain e.
- Optimal tariff
- For a large country the welfare-maximising tariff is t* = 1/E*ₓ, where E*ₓ is the elasticity of foreign export supply. As the country becomes small (E*ₓ → ∞), t* → 0. Welfare rises with the tariff up to t* (terms-of-trade gain exceeds deadweight loss) and falls beyond it.
ECON6023 FAQ
Is ECON6023 hard?
It is demanding because it is derivation-heavy rather than descriptive. This is a graduate unit that assumes advanced microeconomics, and the theory marks come from re-solving a model from its assumptions — CES/Cobb-Douglas demand via the Lagrangian, Ricardian real wages, the DFS A(z)/B(z') curves and the Krugman markup and firm size — not from recalling results.
Students who find it manageable are the ones who can reproduce each derivation on a blank page and who practise the tariff-welfare geometry with labelled areas, rather than reading passively. Because a correct final number without the working scores poorly, steady weekly practice (and not leaving it to STUVAC) is what protects your WAM.
Can AI help me with ECON6023?
Yes, as a step-by-step study aid. Sia is an AI tutor built to mirror how ECON6023 is actually taught and assessed at the University of Sydney: it can walk you through a CES demand derivation, the DFS marginal-good condition, a Krugman firm-size solve or a small- vs large-country tariff-welfare diagram one line at a time, and it checks your reasoning as you go.
Bring your own tutorial or past-paper question and ask Sia to explain each step. It does not do graded assessment for you, and the University of Sydney academic-integrity policy still applies — use it to understand the method, not to produce work you submit.
Where can I find past exam papers / practice for ECON6023?
Start on Canvas, where the unit posts its practice material, tutorial questions with solutions, and the final revision session that works through past-exam questions. Search the University of Sydney Library's past-exam-paper collection for any released papers. The weekly tutorials (Ricardian, DFS, specific factors / Heckscher-Ohlin, Krugman, trade policy) are the closest match to the exam's three-question shape.
This guide also includes a re-authored practice exam that mirrors the paper's structure — a theory derivation, a Krugman solve and a tariff-welfare calculation — with fresh numbers, and you can ask Sia to generate extra practice in the same style and explain each step. Confirm what is officially provided on Canvas.
What are the ECON6023 assessment rules and hurdles?
Assessment is two in-class quizzes (10% each, Weeks 5 and 10, 45 minutes, closed book), a 30% in-person mid-semester test (Week 8, 1 hour, closed book) and a 50% final exam (2 hours plus 10 minutes reading, closed book, three questions) — the weights sum to 100%.
No explicit pass hurdle (for the final or overall) appears in the unit materials, so do not assume one: confirm any hurdle requirement, the exact mark split and the permitted (non-programmable) calculator on your Canvas Assessments page and the unit outline. Note that an older archived handbook listed a written report instead of the two quizzes; the current unit's assessment is the quizzes-plus-tests structure above.
What is on the ECON6023 final exam?
A 2-hour closed-book paper (plus 10 minutes reading time) worth 50%, with three questions: two theory derivations and one applied trade-policy question. The theory questions draw on CES/Cobb-Douglas demand across the Ricardian, DFS and Krugman (1980) models; the applied question is a tariff/quota/subsidy welfare calculation (small or large country). Marks vary by year (for example a 25/25/10 split).
A non-programmable calculator is permitted. Eaton-Kortum (2002) and Global Value Chains are explicitly not examined. The exam sits in the University of Sydney Semester 1, 2027 formal examination period (around June 2027) — confirm the exact date, time and room on Canvas and the USyd exam timetable.
Questions students ask in each ECON6023 chapter
- Why can a country that is worse at making everything still gain from trade?
- Because trade runs on comparative, not absolute, advantage. Even a country with a higher unit labour requirement in both goods has a lower opportunity cost in one of them; specialising in that good and trading for the other lets both countries consume outside their production-possibility frontiers. Absolute productivity levels only affect wages, not the pattern of trade. Chapter 01 · World Trade and the Idea of Comparative Advantage
- Why does trade raise the real wage only in terms of the imported good?
- Because the country keeps making its export good, its real wage in that good is still just its MPL there — unchanged. But at the world price it can trade the export good for more of the imported good than its own MPL in the imported good would have delivered in autarky, so w measured in the imported good rises. That extra purchasing power is exactly the gain from trade. Chapter 02 · The Ricardian Model of Comparative Advantage
- What is the difference between the A(z) curve and the B(z') curve?
- A(z) is the supply/cost side: it says which country can make good z more cheaply and, at the marginal good, ties the relative wage to relative efficiency, ω = A(z'). It slopes down. B(z') is the demand/trade-balance side: it says what relative wage keeps trade balanced when Home makes a share z' of goods, ω = [z'/(1−z')]·(L*/L). It slopes up. Their intersection sets both z' and ω. Chapter 03 · The Dornbusch-Fischer-Samuelson Continuum Model
- Why is the effect on workers ambiguous but the effect on the specific factors clear?
- Labour is mobile, so its wage is anchored by both sectors' value of marginal product; a relative-price change moves the wage up in one good and down in the other, and the net effect depends on what workers consume. The specific factors are stuck: the one in the sector whose price rose enjoys more labour working with it (higher return), while the one in the other sector loses labour (lower return) — no ambiguity. Chapter 04 · The Specific-Factors Model (Short Run)
- What is the difference between factor abundance and factor intensity?
- Abundance describes a country: it is labour-abundant if it has a relatively high labour-capital endowment ratio. Intensity describes a good: apparel is labour-intensive if it uses a relatively high labour-capital ratio in production. The Heckscher-Ohlin theorem pairs them — the labour-abundant country exports the labour-intensive good. Confusing the two reverses the predicted trade pattern. Chapter 05 · The Heckscher-Ohlin Model (Long Run)
- Why does immigration lower the wage in the short run but not the long run?
- In the short run the specific factors are fixed, so more workers mean a lower marginal product of labour and a lower wage. In the long run both factors are mobile: the economy absorbs the extra labour by expanding its labour-intensive industry and shrinking the other (Rybczynski) at unchanged goods prices, so the wage and rental need not change at all (factor-price insensitivity). The Mariel boat lift is the textbook illustration. Chapter 06 · Movement of Labour and Capital: Migration and FDI
- Why does opening to trade raise welfare in the Krugman model?
- Trade enlarges the effective market to L + L*. Since equilibrium firm size and (under CES) the markup are fixed, the extra market supports more firms and hence more varieties available to every consumer. Love of variety then raises real income — consumers can buy from more differentiated producers even though each variety is made in only one place. That variety gain is the gains-from-trade channel. Chapter 07 · Krugman's Monopolistic-Competition Model
- Why can the skilled wage rise in both countries at once?
- Because the activities that shift when offshoring costs fall are the least skill-intensive of Home's activities but the most skill-intensive of Foreign's. Removing them raises the average skill intensity of what remains in each country, so both countries' relative demand for skilled labour — and hence the skilled relative wage — rises together. That is different from Heckscher-Ohlin, where the two countries' factor returns move in opposite directions. Chapter 08 · Offshoring and Global Production
- Why does a small country always lose from a tariff?
- Because it cannot affect the world price, so there is no terms-of-trade gain to offset the distortions. The tariff transfers area a from consumers to producers and area c to the government, but the production loss b and the consumption loss d are pure deadweight — units made domestically at too high a cost and units no longer consumed. Net welfare is −(b + d), always negative. Only a large country can gain, via a terms-of-trade effect. Chapter 09 · Trade Policy I: Import Tariffs and Quotas
- Why does a production subsidy cause a smaller loss than an export subsidy?
- Because it distorts only one margin. A production subsidy raises the price producers receive but leaves the consumer price unchanged, so consumption is undistorted and the deadweight loss is just the production-side area c. An export subsidy raises the home price to P_W + s, distorting both production and consumption, so its loss is −(b + d) for a small country and worse for a large one. This is the targeting principle: hit the goal with the least distorting instrument. Chapter 10 · Trade Policy II: Export Subsidies and Strategic Trade
- What is the difference between trade creation and trade diversion?
- Trade creation replaces high-cost domestic production with lower-cost imports from a partner — an efficiency gain. Trade diversion replaces low-cost imports from an outsider with higher-cost imports from a partner, purely because the partner enjoys a tariff preference — an efficiency loss, plus lost tariff revenue. To tell them apart, compare the true (pre-tariff) resource costs across suppliers; a regional trade agreement is beneficial on net only if creation outweighs diversion. Chapter 11 · Trade Agreements and the Political Economy of Protection
- How should I split my time in the ECON6023 exam?
- In proportion to marks. The paper has three questions and the split varies by year (for example 25/25/10), so allocate writing time to match — do not sink half the exam into a 10-mark applied question. Because the marking rule rewards shown derivations, budget enough time to write each theory question's steps in full and to label the trade-policy diagram, and keep applied answers to about 200-250 words rather than over-writing. Chapter 12 · Exam Revision: Past-Paper Masterclass
How to study for the exam
Treat ECON6023 as a set of derivations you must be able to reproduce cold, not a reading unit.
Each week, redo that week's core model from its assumptions on a blank page: the Ricardian real-wage argument (w/p = MPL), the DFS A(z) = a*(z)/a(z) and B(z') = [z'/(1−z')]·(L*/L) curves and their intersection, the specific-factors magnification chain, the four Heckscher-Ohlin theorems (and how they differ from the short-run specific-factors result — a common exam trap), and the Krugman markup p = wβσ/(σ−1) and firm size y = α(σ−1)/β.
For the policy half, drill the tariff-welfare diagram until the lettered areas (a, b, c, d, e) are automatic, and always check whether a tariff is prohibitive before computing revenue. Because the marking rule is 'show your work and label every diagram', rehearse writing full derivations under time pressure, and keep applied answers to about 200-250 words.
Work the tutorial solutions and the Week 13 revision session's past-exam questions rather than only re-reading notes. When a step won't click, ask Sia to explain that single step a different way and set you a fresh practice question in the same style; it teaches the method and checks your reasoning, and it never substitutes for your own graded work.
Confirm the exam date, room, weighting and calculator policy on Canvas and the University of Sydney exam timetable.
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