4.1.2 International Trade and Business Risk

Question 1

Specialisation

Answer 1

When a business/country focuses on producing a particular good/service.

Question 2

Benefits and drawbacks of specialisation

Answer 2

+ Improves efficiency - workers become highly skilled.
+ Reduces cost per unit
- Overdependence on a single product
- Cost of training

Question 3

Benefits of international trade

Answer 3

+ Export revenues and jobs reduces poverty.
+ Technology, knowledge and skills transfer.
+ Economies of scale.
+ Lower prices for consumers as markets are more competitive.

Question 4

Drawbacks of international trade

Answer 4

• Transport costs.
• Negative external impacts from production and consumption.
• Rising inequality - uneven gains from trade.
• Structural unemployment.
• Pressure on wages and working conditions.

Question 5

Foreign direct investment

Answer 5

When a business with a head office in one country, sets up factories, offices etc in another country

Question 6

Types of FDI

Answer 6

Inward - Foreign capital invested in local resources.
Outward - Direct investment abroad.