Theme 4: International Economics

Question 1

Absolute advantage

Answer 1

Country produces product using fewer factors of production than another nation

Question 2

Comparative advantage

Answer 2

Should specialise in goods and services it can produce of the lowest opportunity cost

Question 3

Limitations of comparative advantage

Answer 3

Perfect knowledge
No transport costs
No economies of scale
Exchange rate
R and D

Question 4

Protectionism

Answer 4

-infant industry
-protect against dumping
-protect domestic employment
-protect against unfair low cost labour
-protect product standards
-raise government revenue
-improve bop defecit
-avoid risk of over specialisation