Chapter 15- international trade

Question 1

absolute advantage

Answer 1

exists if the real resource cost of a product is lower in one country than another

Question 2

comparative advantage

Answer 2

if two countries each specialise in the product with the lowest opportunity cost, then trade and real incomes will increase for both countries

Question 3

free trade areas

Answer 3

are groups of countries which trade freely with eachother, with few or no trade barriers.

Question 4

common markets

Answer 4

have completely free trade internally and a single unified trade policy covering all member countries’ trade with the rest of the world. Besides free movement of goods, there’s also free movement of people. Businesses based within the common market can invest in any member country.

Question 5

single market

Answer 5

is more than just a common market. Member countries agree to harmonise their regulations so that all businesses are competing on a level playing field.

Question 6

Trade Bloc

Answer 6

a group of countries who agree to engage in “free trade”