Trade and trade barriers

Question 1

Absolute advantage

Answer 1

A country has absolute advantage if it can produce more of a good than other countries from the same amount of resource

Question 2

Comparative advantage

Answer 2

The country with the lowest opportunity cost when producing a particular good

Question 3

Import controls

Answer 3

-A quota
-A tariff
-An export subsidy

Question 4

A quota

Answer 4

This is quantity control; a physical limit on the number of a certain good that may be imported

Question 5

A tariff

Answer 5

This is a tax imposed on imports from other countries which effectively raises the price of imports for consumers. A border tax on the buyer, not the seller.

Question 6

How tariffs affect the product/service

Answer 6

Tariffs make it more expensive for a buyer to import a good into the country. This makes the good more expensive and therefore less in demand. It may benefit the sales of a rival domestic product if the import is now more expensive than the homegrown product

Question 7

An export subsidy

Answer 7

Money given to a domestic firm by the government to encourage them to sell abroad and enable them to charge a lower price than would otherwise be possible.

Question 8

The case for free trade

Answer 8

Efficient use of resources - Where countries can specialise (on the basis of comparative advantage) and trade, welfare should increase as production is more efficient

Question 9

Justifiable import controls

Answer 9

-Infant industries
-Sunset industries
-Strategic trade theory
-Agricultural efficiency
-Avoiding overspecialisation
-Anti dumping
-Self sufficiency
-Employment