The Global Economy

The principle of comparative advantage shows:

• that nations can benefit from specialisation and trade even if they do not have an absolute advantage.

• that nations ought to operate as closed economies.

• that nations ought to concentrate on the production of only one commodity that will give a surplus that can be traded.

• that nations can only benefit from multilateral trade.

A country (A) has an absolute advantage over another country (B) in the production of

coal if:

• A’s total output of coal is greater than B’s.

• A can produce more coal over a year.

• there is more demand for coal in A.

• A can produce coal at lower resource cost per unit than B.

The principle of comparative advantage shows that the benefits of trade rely on:

• resource costs.

• opportunity cost.

• marginal costs.

• transport costs.

Australia’s main trading partners are:

• Russia and China.

• New Zealand and the USA.

• China and Japan.

• China and the USA.

International trade increases the standard of living of a country because it:

• increases the range of goods and services available.

• enables the government to increase its revenue through the collection of tariffs.

• creates employment in import-competing industries.

• overcomes high transportation costs.

A nation will gain if:

• exports increase and imports decrease.

• exports decrease and imports increase.

• both exports and imports increase.

• both exports and imports decrease

When a country exports:

• domestic producers gain and domestic consumers gain.

• domestic producers lose and domestic consumers gain.

• domestic producers gain and domestic consumers lose.

  .

• domestic producers lose and domestic consumers lose

Australian exports are classified into four sectors. The ranking of these export sectors, from largest to smallest is:

• services, manufacturing, mining, agriculture.

• mining, services, manufacturing, agriculture.

• manufacturing, mining, services, agriculture.

• mining, manufacturing, services, agriculture

The fundamental economic advantage of free world trade is:

• the easing of political tensions between nations.

• all nations will develop similar industries.

• all nations will share equally in the world’s wealth.

• a more efficient allocation of resources.

International trade is said to be due to differences in countries’ comparative costs, which refers to:

• A the relative efficiency of production of goods in different countries.

• B prices of exported goods compared to the price of imported goods

• C the average cost of making different goods in one country.

• D the relative amounts of immobile resources used in different countries in the manufacture of export goods.