International Trade

Which method of protection always reduces the supply of an imported good to zero?

• embargo

• quota

• subsidy

• tariff

What is a disadvantage of increasing international specialisation?

• Consumers pay higher prices for goods and services reducing their welfare.

• Domestic firms may be uncompetitive leading to structural unemployment.

• Domestic firms may experience rising costs as they pay more for imports.

• Resources may be used less efficiently as domestic firms face less competition.

What is the most likely benefit for a low-income economy if it removes tariffs on imported goods and services?

• more choice for domestic consumers

• more employment in declining industries

• more exports by domestic firms

• more tax revenue from imports

Economies have become increasingly linked through globalisation.

What would discourage this?

• creation of a single world market

• direct foreign investment by multinational companies

• expansion of trade in financial services

• protectionist policies by trading groups

A country specialises in the production of steel, toys and textiles.

What is a disadvantage of specialisation for the country’s workers?

• They cannot afford to buy products from other countries.

• They could become structurally unemployed if global demand changes.

• They have to learn a variety of skills.

• They have too much choice which wastes their time.

The US imposed tariffs on cars and motorcycles from Germany.

What is the effect of these tariffs?

• decrease in inflation in the US

• decrease in trade between the US and Germany

• increase in profits of car and motorcycle producers from Germany

• increase in standards of living in the US and in Germany

Malaysia and Indonesia specialise in the production of palm oil.

What is a disadvantage of specialisation?

• concentration of labour in the activity in which it is most productive

• creation of jobs to meet world demand

• reliance on trade with other countries for other goods

• rising palm oil prices

What is a reason for trade protection?

• to reduce a deficit on the current account of the balance of payments

• to reduce a surplus on the current account of the balance of payments

• to reduce economic growth

• to reduce inflation

What is a quota in international trade?

• a government grant to encourage production

• an administrative and technical barrier

• a limit on the quantity of imports

• a tax on imports

In 2013, the European Union (EU) levied a 48% tariff on low-priced Chinese solar panels because the low price was the result of subsidies from the Chinese government.

Which argument for protectionism was the EU using?

• the anti-dumping argument

• the infant industry argument

• the strategic industry argument

• the sunset industry argument