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International Trade QP

1 The table shows the amount of good X or the amount of good Y that can be
produced by country R and country T if each uses all of their resources.

What can be concluded from the table?

A Country R has an absolute advantage in producing good Y and a comparative
advantage in producing good X.
B Country R has an absolute advantage in producing good X and a comparative
advantage in producing good Y.
C Country T has an absolute advantage in producing good X and a comparative
advantage in producing good Y.
D Country T has an absolute advantage in producing good Y and a comparative
advantage in producing good X. O/N19/11/21

2 The diagram shows Australia’s terms of trade per quarter from Q2, 2014 to Q1, 2017.

In which period did Australia’s terms of trade decline and then improve?
A Q2, 2014 to Q4, 2014
B Q1, 2015 to Q3, 2015
C Q4, 2015 to Q2, 2016
D Q3, 2016 to Q1, 2017 O/N19/11/23

3 What is not an example of protectionism?

A the European Union (EU) requiring goods imported into member states to meet
safety
standards
B the Pakistan government increasing the rate of goods and services tax, GST, on
some
exported goods from 2% to 5%
C the Nigeria government banning the import of packaged sugar
D the US imposing a 35% tariff on tyres imported from China O/N19/12/21
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4 The table indicates the factor inputs required to produce wheat and cars in
countries X and Y.

What makes it possible for both countries to benefit from trade?

A Country X has an absolute advantage in wheat and car production.
B Country Y has an absolute advantage in wheat and car production.
C Country Y has a comparative advantage in wheat production.
D Opportunity cost of wheat and car production is the same between countries
O/N19/12/23

5 The diagram shows the effect of a tariff on a product.

From this diagram, what determines the gain the tariff generates for domestic
producers?
A the price elasticities of domestic supply and demand
B the tariff rate and the price elasticities of both domestic demand and supply
C the tariff rate and the price elasticity of domestic demand
D the tariff rate and the price elasticity of domestic supply O/N19/11/22

6 The European Union consists of a group of countries with free trade between its
members and a
common external tariff on trade with non-members.
What would weaken the operation of this customs union?
A devaluation of any member’s currency
B differences in wage costs between members
C entry tests for seasonal migrant workers
D one member country agreeing a trade deal with a non-member country O/N19/11/23
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7 Industrialised countries X and Y trade with each other. Country X imposes a general
tariff of 20%
on imports from country Y.
In which circumstances would the imposition of the tariff be unfavourable to country
X?
A if country X is seeking to protect its infant industries
B if country X lacks the capacity to produce import substitutes
C if imports from country Y have been dumped in country X
D if imports of manufactured goods from country Y are price elastic M/J19/11/23

8: A country decides to remove all its tariffs and engage in free international trade
What will be the final decision the country has to make before free trade takes place?
A deciding which resources to allocate to the production of goods and services for
international
trade
B deciding which goods and services should be provided for international trade
C identifying the opportunity costs of production of goods and services which might
be used for
international trade
D setting an appropriate exchange rate for the international trade of goods and
services M/J19/12/22

9 The diagram shows the imposition of an import tariff.

SW is world supply.
SW + tax is world supply after the tariff is imposed.

Which statement is not correct?

A Domestic demand will fall from q4 to q3.
B Imports will change from q1q4 to q2q3.
C Imports will fall from q4 to q3.
D Supply of domestic goods will increase from q1 to q2. M/J19/12/25
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10 The diagram shows the effect of introducing an import quota on the market for
good X.

What is the change in domestic supply and the size of the import quota?

M/J19/13/23

11 Country X joins a customs union with country Y and will remove the tariff on its
imports of good M
from country Y.
Under which conditions will trade creation in country X be the smallest?

M/J19/13/24

12 What will definitely lead to an improvement in the terms of trade?

A Export prices fall whilst import prices rise.
B Export prices rise by the same amount as import prices.
C Export prices rise slower than import prices.
D Export prices rise whilst import prices stay the same. F/M19/12/19
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13 In the diagram Sd is the domestic supply of a product, Sw is the world supply and
Dd is the domestic demand for the product

After operating a free trade system the country bans all imports.
What will be the effect on the revenue of domestic producers and world producers of
the ban?

. F/M19/12/20

14 Countries M and N produce the world supply of machines and textiles. The table
shows what each country produces when it divides its resources equally between the
two products

What should happen according to the principle of comparative advantage?

A Country M should produce both machines and textiles.
B Country M should specialise in the production of machines, country N should
specialise in
production of textiles.
C Country M should specialise in the production of textiles, country N should
specialise in
production of machines.
D Country N should produce both machines and textiles F/M19/12/22
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15 Two countries trade with one another without any forms of protection. They also
impose a
common external tariff on the imports from all other countries.
What have these two countries formed?
A a customs union
B a free trade area
C a monetary union
D an economic union F/M19/12/24

16 The table shows the ability of two countries, P and Q, to produce two goods, Y and
Z.

Which statement is correct?

A P has an absolute advantage in Z and Q has a comparative advantage in Y.
B P has an absolute advantage in Z and Q has an absolute advantage in Y.
C P has a comparative advantage in Y and Q has an absolute advantage in Z.
D P has a comparative advantage in Z and Q has an absolute advantage in Y.
O/N18/11/25

17 Which action increases and which action decreases the level of protectionism?

O/N18/11/26
18 Country M imposes a tariff on imports of steel.
Which price elasticity values will result in the smallest reduction in steel imports into
M?

O/N18/11/27
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19 Two countries, Northland and Southland, produce two goods, food and drink. The
table shows how many hours each has to use to produce one unit of each product.
After specializing according to comparative advantage, they decide to trade.

Which exchange rate will allow both countries to benefit from trade?
A 1 unit of food to 2
1 unit of drink
B 1 unit of food to 1 unit of drink
C 1 unit of food to 2 units of drink
D 1 unit of food to 3 units of drink O/N18/13/25

20 What is a characteristic of a customs union but not of a free trade area?

A a common external tariff
B a common tariff between member countries
C fixed exchange rates between member countries
D the abolition of all tariffs between member countries O/N18/13/26

21 In the diagram, Dd and Sd represent the domestic demand and supply curves for a
product.
Sw represents world supply of the product when there is free trade, at a world price of
Pw. The
initial domestic market equilibrium level of consumption of the product is at E.
If a tariff of t were to be imposed, world supply would now be represented by Sw +
tariff, at a price
of Pw + t.

O/N18/13/27
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22 In the diagram, JK is a country’s production possibility curve.

LK is its trading possibility curve which shows possible combinations of good X and
good Y after
specialising in the product in which it has comparative advantage, and then trading
this product

The country consumes OR of good X and OT of good Y.

Which quantities of goods X and Y does it produce?

SP16/01/26

23 What is the most likely aim of a government that increases the level of tariffs on
imported
manufactured goods?
A a fall in interest rates
B a fall in the exchange rate
C a rise in domestic employment
D a rise in the general price level SP16/01/27