WHSS 30 on 30 Follow-up: International Trade

The diagram shows production possibility curves for two countries, X and Y. What can be deduced from the diagram?

A Both countries can benefit from specialisation.

B Country X has a higher opportunity cost than Y in producing good M.

C Country Y has a comparative advantage in both goods.

D Trade between X and Y will not take place.

• A

• B

• C

• D

The statements that follow relate to possible gains from an increase in free trade. Which gain is least certain to result?

A Increased specialisation leads to improvements in productivity.

B Trade extends the choice of goods available to consumers.

C Trade leads to an increase in the number of jobs.

D Trade leads to a reduction in costs of production.

• A

• B

• C

• D

The table shows how much rice and wheat two countries, X and Y, can grow when each country divides its resources equally between growing rice and wheat. Assume that each country now specialises according to comparative advantage and trades with the other country. Which terms of trade would benefit both countries?

A 1 wheat = 5 rice

B 1 wheat = 3 rice

C 1 wheat = 2.5 rice

D 1 wheat = 2 rice

• A

• B

• C

• D

The diagram shows the production possibility curves of two economies, X and Y. Which statement about the two economies is correct?

A Both economies always have the identical opportunity costs.

B Both economies have the same future growth prospects.

C The opportunity costs are constant in both economies.

D The two economies can never produce the same combination of products.

• A

• B

• C

• D

In the diagram, MN is the production possibility curve of a country that has a comparative advantage in the production of good Y.

What might enable the country to consume the quantities of X and Y indicated by point R?

A increased specialisation in the production of good X

B international trade

C a reduction in unemployment

D increased specialisation in the production of good Y

• A

• B

• C

• D

Since 2000 a country’s export prices have increased on average by 50 % and its import prices by 25%.

What is the current figure for the country’s terms of trade (2000 = 100)?

A 75

B 83

C 120

D 125

• A

• B

• C

• D

Which statement about economic integration is correct?

A A customs union has a common currency.

B A customs union has a common external tariff.

C A free trade area has internal trade barriers.

D A free trade area has no external trade barriers.

• A

• B

• C

• D

A government has been protecting its domestic car industry with a quota on imported cars. It then removes the quota and replaces it with a subsidy to domestic car producers. How will this change affect the price of cars and the level of consumer choice?

• A

• B

• C

• D

The table shows indicators of a country’s economic performance over a two-year period. What is consistent with the above information?

A There has been a fall in the price of exports.

B There has been an improvement in the terms of trade.

C There has been an increase in the level of real income per head.

D There has been an increase in the price of imports.

• A

• B

• C

• D

What will cause an improvement in a country’s terms of trade?

A a fall in incomes abroad

B a fall in its exchange rate

C a rise in its inflation rate

D a rise in the price of its imports

• A

• B

• C

• D