Free trade v Protectionism

What is one of the benefits of specialisation in international trade?

• Decreased production and consumption

• Increased reliance on a single economy

• Increased production and consumption due to efficiency

• Higher costs and lower living standards

Answer explanation

Specialization in international trade leads to increased production and consumption due to efficiency, allowing countries to focus on what they do best and trade for other goods and services.

What concept explains why nations can benefit from specialising in the production of certain goods and trading with other nations?

• Economic scale

• Comparative advantage

• Protectionism

• Scarce resources

Answer explanation

Comparative advantage explains why nations benefit from specializing in certain goods and trading with others by focusing on producing goods where they have a lower opportunity cost.

What is protectionism?

• Policies that encourage free trade

• Government actions that promote international trade

• Government policies or actions that restrict or prohibit international trade

• The reliance on other countries for goods and services

Answer explanation

Protectionism refers to government policies or actions that restrict or prohibit international trade, making it the correct choice in this context.

What is a tariff in the context of protectionism?

• A tax imposed on exports.

• A tax imposed on imports.

• A limit on the number of exports.

• A trade agreement between two countries.

Answer explanation

A tariff in the context of protectionism is a tax imposed on imports, making it more expensive for foreign goods to enter the domestic market.

What are quotas?

• Agreements to limit the volume of exports to one another.

• Taxes imposed on imports.

• Laws to ban all or some types of imported goods.

• Quantitative limits on the level of imports allowed into a country.

Answer explanation

Quotas refer to quantitative limits on the level of imports allowed into a country, making it the correct choice.

What is an embargo?

• A tax imposed on imports.

• A quantitative limit on imports.

• A law to totally ban all or some particular types of imported goods.

• A requirement for importers to apply for a license.

Answer explanation

An embargo is a law to totally ban all or some particular types of imported goods, making it the correct choice among the options provided.

Why do some economists favor free trade?

• It leads to more overall employment and higher living standards.

• It requires complex documentation for foreign firms.

• It involves two countries making an agreement to limit their exports.

• It imposes taxes on imports.

Answer explanation

Free trade leads to more overall employment and higher living standards by promoting efficiency and specialization in production.

What is the infant industry argument for protectionism?

• It is necessary to protect mature industries from foreign competition.

• New domestic industries need protection from foreign exports until they are ready to compete.

• All industries should be protected from foreign competition to ensure national security.

• Protectionism is needed to prevent the export of domestic jobs.

Answer explanation

The infant industry argument for protectionism states that new domestic industries need protection from foreign exports until they are ready to compete, making this the correct choice.

What is the national security argument for protectionism?

• To protect the employment rates within the country.

• To ensure that domestic industries are competitive.

• To maintain control over military assets by not relying on others for defence-related goods.

• To increase the efficiency of resource utilization in the economy.

Answer explanation

The national security argument for protectionism is to maintain control over military assets by not relying on others for defence-related goods.

What is the employment argument for protectionism?

• Protectionism is necessary to maintain a country's cultural identity.

• Restricting imports in certain industries creates jobs in those industries.

• Protectionism ensures that all industries within a country are equally competitive.

• Protectionism is needed to ensure the quality of goods produced domestically.

Answer explanation

Restricting imports in certain industries creates jobs in those industries.