Lecture 6: Trade & environment

Question 1

What is a comparative advantage?

Answer 1

The theory that trade benefits both parties by allowing each to specialise in goods that it can produce with relative efficiency.

Question 2

What is the effect if the world price (PW) for import?

Answer 2

It increases demand but lowers production

Question 3

What are the negative outcomes of trade?

Answer 3

• extra transport more pollution
• Alien invasive species
• displacing farmers onto new land indirectly leads to deforestation/soil erosion

Question 4

What are benefits to trade?

Answer 4

• May help spread environmentally friendly technology
• Tends to promote efficient production
• May come under pressure to improve env. standards when product quality/env. standards are at issue.

Question 5

What does trade promote?

Answer 5

• Growth (increased scale)
• Changes in industrial patterns (composition)
• Improvements in technological efficiency (technique)

Question 6

What are 3 counterarguments for IPAT?

Answer 6

• Technological process is a large positive influence
• The IPAT equation effectively lacked any behaviour response to the increasingly adverse impact being modelled.
• Substantial problems with both the quantity and quality of the data underlying the IPAT view

Question 7

The NAFTA Commission on Environmental Cooperation (CEC)…

Answer 7

Produces reports on environmental issues but has few enforcement powers.

Question 8

The specificity rule states that…

Answer 8

Policy solutions should be targeted directly at the source of a problem”

Question 9

What theory states that trading partners both benefit from trade through specialization in the goods each can produce most efficiently?

Answer 9

● Comparative advantage

Question 10

What is an absolute advantage?

Answer 10

The ability to produce a particular good at a lower opportunity cost than another