Explain the concepts of “Free on Board” (FOB) and “Cost Insurance Freight” (CIF) shipping quotations. Describe which price components are included in FOB and CIF quotations. Afterwards, use a concrete example to explain how information on FOB and CIF quotations can be used to measure transport costs. (8 points)
Describe the two forms in which firms can participate in global value chains (GVC). Furthermore, explain (i) under which condition(s) a country will participate in a GVC according to the model of Baldwin (2011) and (ii) how an increase in transport costs would impact the two forms of global value chain participation according to that model. (7 points)
The figure below shows the hypothetical value chain of a cellphone. The boxes indicate specific tasks in the value chain and the countries performing them, the numbers on top of the arrows indicate the price at which a specific component is sold to the next entity in the value chain. Taking the perspective of the U.S., first calculate and compare the values of imported intermediates and imported foreign value added. Then explain what is causing the discrepancy between the two values and discuss, based on this example, which of the two constitutes a better measure for the participation of foreign countries in a global value chain. Make sure you also explain why you think one measure is better than the other.(9 points)
Type your answer in the space between the two lines (word limit: 400).