International Trade

Question 1

Trade

Answer 1

The action of buying and selling goods and services, especially across borders or between regions.

Question 2

Production Possibility Frontier

Answer 2

A graph illustrating the quantities of two goods or services that can be produced by an individual, firm or country; utilising fixed total factors of production.

Question 3

Absolute Advantage

Answer 3

The ability of an individual, firm or country to produce more of a good or service than its competitors.

Question 4

Comparative Advantage

Answer 4

The ability of an individual, firm or country to produce a good or service at a lower opportunity cost than other producers.

Question 5

Specialisations

Answer 5

Individuals, firms and countries are better off when they specialise in those activities in which they have a comparative advantage, and trade for the other goods and services they desire.
Trade improves efficiency by encouraging production at the lowest opportunity cost.

Question 6

Imports

Answer 6

Goods and services brought in from abroad (other countries) to be sold for consumption or used as inputs in local production.

Question 7

Exports

Answer 7

Goods and services produced locally and sold abroad (in other countries).

Question 8

Free Trade

Answer 8

International trade left to its natural course; free from tariffs, quotas, or other restrictions imposed by governments.

Question 9

Autarky

Answer 9

situation in which a country does not trade with other countries.

Question 10

Small Open Economy

Answer 10

An economy in which goods and services may be traded across borders without restriction (open), and which has a negligible impact on global demand and supply (small).

Question 11

Tariff

Answer 11

A tax or duty to be paid on imports of a particular good or service. Usually levied on a per unit basis.

Question 12

Import Quota

Answer 12

A limit on the quantity of a good or service that can be imported into a country.