Questions

Question 1

Discuss whether or not the discovery of oil in a country will benefit its economy

Answer 1

Why it Might:
- May increase GDP
- May increase Employment
- May increase Tax Revenue
- May increase Exports

Why it Might Not:
- May create Pollution
- May damage wildlife Habitats
- May increase rate of exchange
- Oil may not be in demand

Question 2

Discuss whether or not a country will benefit from diamond mining

Answer 2

Why it might:
- High global demand
- Create employment for skilled/unskilled workers
- Increase Output
- May increase Tax revenue

Why it Might Not:
- Price may fluctuate
- May be competition
- Can cause external costs (eg. pollution)
- Supply may be depleted

Question 3

Identify other than natural rubber, two primary-sector products

Answer 3

Coal and Oil

Question 4

Explain two reasons why a country may change its specialisation

Answer 4

1. Discovery of new resources that may be more efficient in production of certain products
2. Change in costs of production like cheaper labour costs.

Question 5

Analyse the economic benefits for a country in producing manufactured goods instead of primary sector products

Answer 5

• Higher demand for workers
• Reduced unemployment
• More skilled jobs
• Higher worker income
• Higher living standards
• Higher price

Question 6

Discuss whether or not countries specializing, benefits consumers.

Answer 6

Why it Might:
- Countries may specialize in what they’re best at
- Better paid jobs, more purchasing power of consumers
- Cost of production may fall
- Output may rise

Why it Might Not:
- More reliance on imports
- Supply problems may affect a particular country
- Trade disputes may cut off supplies
- A country may gain monopoly of production, raising price and lowering quality.

Question 7

Discuss whether or not increased international trade can promote economic growth

Answer 7

Why it may:
- Increase size of the market for domestically produced goods
- Firms can specialize and lower costs of production
- Increase competitive pressure (1) Making firms more efficient (1)

Why it may not:
- Increase amount of imports, reducing total demand of economy
- Domestic firms may not be able to compete causing less revenue
- May result in shortages of the domestic market
- Make the economy more subject to sudden changes in supply and demand

Question 8

Explain two advantages to a country of specialization

Answer 8

1. Generates economies of sale, allowing a country to be more internationally price competitive
2. Improves efficiency by producing what the country is best at

Question 9

Define National Specialization

Answer 9

National specialization occurs when a country focuses on the production of a narrow range of goods or services to increase its efficiency

Question 10

Identify the two main factors which allow a country to specialize

Answer 10

1. High resource availability
2. Cheaper cost of production

Question 11

Define international market share

Answer 11

International market share is the percentage of the total market revenue that a single country has

Question 12

Define superior resource availability

Answer 12

Superior resource availability refers to the quality or quantity of it’s resources. If they have higher quality or quantity of resources it will make the goods/country more competitive

Question 13

Explain two reasons why a firm would want to specialize in producing only one product.

Answer 13

1. So the firm can focus on what it is best at producing in order to increase efficiency
2. The firm is able to achieve economies of scale in order to reduce cost of production and increase profit

Question 14

Explain two advantages to a country of specialization

Answer 14

1. Specialization increases GDP by making better use of scarce resources allowing the country to export more.
2. Improves productivity as the country will produce what they are best at

Question 15

Explain two disadvantages to a country of specialization

Answer 15

1. Many firms in an entire industry may close which results in structural unemployment
2. Specialization using a country’s own resources will lead to resource depletion over time therefore specialization will increase the rate of resource depletion

Question 16

Explain one of the two main factors which allow a country to specialize

Answer 16

• Cheaper cost of production
• Cheaper production leads to Lower selling price
• Lower prices allow a country to gain a lead in international market share
• Some countries are able to produce cheaply using machinery

Question 17

Discuss whether or not a country will benefit from specializing in agricultural such as sugar

Answer 17

Why it may benefit:
- Increase efficiency and productivity training workers to be more skilled
- Benefit from economies of scale and lower costs of production
- Rise in exports due to lower price
- Agriculture may be labour intensive creating employment

Why it may not:
- Demand may fall due to change in trends
- Supply may be reduced due to bad weathee
- Agricultural products tend to have more restrictions imposed on them
- Trade Restrictions limit revenue from exports

Question 18

Discuss whether or not an economy should mine and sell all of its gold

Answer 18

Why it might:
- More tax revenue can be earned allowing the government to spend more
- Mining gold will increase employment
- Increased output leading to economic growth
- As a result of increasing incomes, there may be an increase in living standards

Why it might not:
- Price of gold may rise in the future, it may not currently be the best time to sell it
- There may be a depletion of gold due to high demand
- Advances in technology may reduce costs of gold extraction in the future
- Exchange rate may be low which will lower the revenue that the country can make exporting gold