4.2.6.2 Trade NOTES

What does the model of comparative advantage illustrate?

• Countries benefit from specializing in goods where they have the lowest costs.

• Countries should only produce goods they can make more efficiently than any other country.

• Countries can benefit from specializing in goods and services where they have a comparative advantage.

• All countries have the same advantages in goods production.

What is the main difference between comparative and absolute advantage?

• There is no significant difference between the two concepts.

• Comparative advantage is about the absolute productivity of goods, while absolute advantage focuses on opportunity costs.

• Both concepts encourage countries to specialize in goods they can produce most cheaply.

• Comparative advantage focuses on opportunity costs, while absolute advantage is about absolute productivity.

How does specialization increase a country's total output?

• By reducing the amount of trade with other countries.

• By allocating resources more efficiently to areas of comparative advantage.

• By focusing on goods that can be produced at the lowest cost globally.

• By increasing the variety of goods produced.

What economic benefit does trade provide through economies of scale?

• Reduces the quality of goods produced.

• Increases the cost of goods for consumers.

• Decreases the average cost per unit through expanded production.

• Limits the market size for goods and services.

What is a potential cost associated with international trade?

• Transportation and logistics costs.

• Lower prices for imported goods.

• Increased domestic competition.

• Decreased market opportunities.

What can cause changes in the pattern of trade?

• Technological advancements and shifts in consumer preferences.

• Stable consumer preferences over time.

• Decreased participation in economic blocs.

• Constant trade policies.

What is the role of tariffs in protectionist policies?

• To protect domestic industries from foreign competition.

• To decrease the price of imported goods.

• To increase global trade by reducing barriers.

• To eliminate taxes on exports.

What is a main feature of a customs union?

• It promotes trade barriers with non-member countries.

• It increases tariffs among member countries.

• It discourages economic integration.

• It allows for the free movement of goods and services within the union.

What is the primary aim of the Single European Market?

• To restrict labor movement among member states.

• To increase internal barriers to trade.

• To promote trade with non-member countries only.

• To create a unified market for goods, services, capital, and labor.

What is the main function of the World Trade Organization (WTO)?

• To restrict international trade through stringent regulations.

• To promote protectionist policies among member countries.

• To resolve trade disputes and promote a transparent trading system.

• To focus solely on the economic interests of developed countries.