basics of trade

1. What is one main reason countries trade with each other?

• To increase taxes
• To gain access to resources
• To reduce workers’ wages
• To avoid innovation

2. What does trade usually do to consumer prices?

• Raises them
• Lowers them
• Keeps them the same
• Makes them unpredictable

3. Why does trade increase consumer choice?

• More domestic firms open
• Imports bring goods from abroad
• Governments set quotas
• Consumers demand less

4. How does trade encourage innovation?

• By reducing investment
• By limiting competition
• By increasing competition between firms
• By restricting imports

5. Which of the following explains “differences in resources”?

• All countries produce the same goods
• Countries specialise based on climate and skills
• Consumers prefer imports
• Governments set tariffs

6. What is an example of differences in resources?

• Saudi Arabia exporting oil
• UK importing coffee
• Brazil exporting bananas
• All of the above

7. Economies of scale occur when firms…

• Produce more and lower average costs
• Reduce output to increase prices
• Focus on domestic markets only
• Avoid innovation

8. Why does large-scale production reduce costs?

• Fixed costs are spread over more units
• Wages always fall
• Consumers demand less
• Governments subsidise

9. Protecting domestic employment means…

• Preventing workers from emigrating
• Using tariffs to protect local jobs
• Hiring only skilled workers
• Banning exports

10. Why might governments protect against low-cost labour?

• To make imports cheaper
• To stop unfair competition from countries with very low wages
• To reduce worker skills
• To encourage outsourcing