Yr 11: Globalisation & Market Failures Flashcards
Globalisation refers to…
… The process of increased integration between countries, including trade and investment
What is an import?
A good or service purchased from another country
What is an export?
A good or service sold to another country
A country has a comparative advantage if…
It has a lower opportunity cost of producing a product than other countries
Country A can produce 500 cars or 700 tractors. It has an opportunity cost for 1 car of…
1.4 tractors
Country A can produce 500 cars or 700 tractors. It has an opportunity cost for 1 tractor of…
0.71 cars
Country A can produce 600 cars or 700 tractors. It has an opportunity cost for 1 car of…
1.17 tractors
Country A can produce 600 cars or 700 tractors. It has an opportunity cost for 1 tractor of…
0.86 cars
Country A can produce 500 cars or 600 tractors. Country B can produce 400 cars or 450 tractors. Country A has a comparative advantage in…
Tractors
Country A can produce 500 cars or 600 tractors. Country B can produce 400 cars or 450 tractors. Country B has a comparative advantage in…
Cars
Country A can produce 300 cars or 250 tractors. Country B can produce 400 cars or 380 tractors. Country A has a comparative advantage in…
Cars
Country A can produce 300 cars or 250 tractors. Country B can produce 400 cars or 380 tractors. Country B has a comparative advantage in…
Tractors
Why is free trade good for economic growth?
Countries can specialise in what they are efficient at and then trade with other countries for the other products that they want. By producing what they are efficient at, the country can increase the total amount it is able to produce.
What is an advantage of free trade for individuals?
Products can be purchased more cheaply from overseas
What is a disadvantage of free trade for individuals?
Firms that cannot compete with foreign rivals may make people redundant or even shut down, increasing structural unemployment
Why is foreign investment good for an economy?
It provides money for firms to use to fund expansion, leading to increased aggregate supply.
Why is foreign investment a risk for an economy?
The economy has to continually pay returns (interest or dividends) on foreign investment, and eventually will have to pay the funds back.
What are 2 negative impacts of globalisation on the environment?
1) Fuel and emissions from transporting goods internationally
2) Firms shift production to countries with weaker environmental laws
Is Australia a net borrower from or lender to other countries?
A net borrower
Australia has about $_____ of gross foreign debt and about $_____ of net foreign debt
Australia has about $2 trillion of gross foreign debt and about $1 trillion of net foreign debt
Is more of Australia’s foreign debt borrowed by the government or by private firms?
Firms
A public good is…
A product that is non-rival and non-exclusive, so firms may not be paid for supplying the product so are unlikely to make it
Non-rival means…
When one person consumes the product, it does not affect another person’s consumption of the same product
Non-exclusive means…
Someone cannot be prevented from consuming the product, even if they didn’t pay for it
A free rider is…
Someone who uses a product without paying for it
A positive externality is…
A positive effect of an activity on a third party
A negative externality is…
A negative effect of an activity on a third party
How do you draw a positive externality?
An additional demand line to the right labeled ‘marginal social benefit’
How do you draw a negative externality?
An additional supply line to the left labeled ‘marginal social cost’
Why are greenhouse gas emissions a negative externality?
When individuals or firms release greenhouse gas emissions from burning fossil fuels, it contributes to climate change which will worsen the severity and frequency of natural disasters for third parties
What does it mean to ‘internalise’ an externality?
To add a fee (such as a tax) on a product so that the price signal now reflects the full social cost or benefit of the product including the externality
Is a street light a public good?
Yes
Is a public bus a public good?
No - it is both rival and exclusive
Is a park a public good?
No - it is both rival and exclusive
Is a library a public good?
No - it is both rival and exclusive
Is Netflix a public good?
No - it is exclusive
Is a road a public good?
No - it is both rival and exclusive
