International trade and free trade

For each country, P and Q, one person is able to produce either the quantity of X or the quantity of Y indicated. In which situation does country P have absolute advantage in producing Y and country Q have comparative advantage in producing X?

Feb/March 2016

The US President approved a trade agreement that granted Latin American and Caribbean countries wider duty-free entry into the US market. Who could gain in the short run from this agreement?

Feb/March 2017

Countries M and N account for the world’s supply of machines and textiles. The table shows the output of each country when its resources are split equally between the two products. What should occur according to the principle of comparative advantage?

Feb/March 2019

Four countries, A, B, C and D, engage in international trade. In the diagram, each circle shows a free trade area made up of the countries inside that circle. One country may be part of more than one free trade area. Any country that lies outside a circle encounters trade barriers. Which country has the greatest opportunity to benefit from free international trade?

Feb/March 2020

Two countries, X and Y, make food and drink. The table indicates the number of hours needed for each country to produce one unit of each product. What would happen if country Y doubles its productivity in producing drink and both countries specialise in producing just one good based on comparative advantage?

Feb/March 2022

What can be understood most clearly from knowing a country’s terms of trade?

Feb/March 2023

The table shows the factor inputs needed to produce wheat and cars in countries X and Y. Units of factor inputs needed to produce one tonne of wheat: country X 4, country Y 8. Units of factor inputs needed to produce one car: country X 2, country Y 6. What enables both countries to gain from trade?

Feb/March 2024

Country X trades with country Y. What are the terms of trade for country X?

Feb/March 2025

With the help of a formula, explain two reasons for an improvement in the terms of trade and consider how far an improvement in the terms of trade will benefit an economy.

Feb/March 2025

Discuss whether Australia and Thailand should have removed all tariffs at once.

May/June 2006

The significance of copper production in Chile

May/June 2009

The diagram illustrates production possibility curves for two countries, X and Y. What can be inferred from it?

May/June 2010

The statements below concern possible benefits of an increase in free trade. Which benefit is the least certain to occur?

May/June 2010

Which statement concerning trade unions is normative?

May/June 2010

The statements below concern potential benefits arising from an increase in free trade. Which benefit is the least likely to occur?

May/June 2010

The statements below concern possible benefits of an increase in free trade. Which benefit is the least likely to occur?

May/June 2010

Explain how a country’s production possibility curve is determined by its factors of production.

May/June 2010

Each diagram presents the production possibility curves for two economies, X and Y, that make food and clothes. In which diagram would both economies gain from specialising in the good for which they have comparative advantage and then trading at an exchange rate of 1 unit of clothes for 1.5 units of food?

May/June 2011

In each diagram, the production possibility curves for two economies, X and Y, are shown; they produce food and clothes. In which diagram would both economies gain if they specialised in the good for which they have comparative advantage and then traded at an exchange rate of 1 unit of clothes to 1.5 units of food?

May/June 2011

A country’s terms of trade is presently 150 (base year 2000 = 100). From 2000 onwards, the average price it has earned for exports has risen by 20 %. By how much has the average price it has paid for imports changed?

May/June 2011

Explain the limitations of the theory of comparative advantage in accounting for a country’s pattern of trade.

May/June 2011

Thailand can produce rubber at a lower opportunity cost than China. Even so, it still brings in some rubber from China. What might account for Thailand importing rubber from China?

May/June 2012

A country has a comparative advantage in producing spices. Why might it decide not to specialise in spices?

May/June 2012

Thailand can produce rubber at a lower opportunity cost than China. Even so, it still brings in some rubber from China. What might account for Thailand importing rubber from China?

May/June 2012

The price of a good sold on the international market rises. Which group would be affected most adversely?

May/June 2012

Use economic analysis to explain why international trade is beneficial.

May/June 2012

What could cause a country to lose its comparative advantage in rice production?

May/June 2013

The table gives the production costs for one unit of food and one unit of clothing in countries X and Y, stated in each country's own currency. country X: food $2, clothing $4; country Y: food £1, clothing £1. The exchange rate is fixed at £1 = $3. At what transport cost per unit of each commodity would the gains from trade be completely removed?

May/June 2013

In a world with two countries, one nation may produce one product more efficiently, while the other nation may produce a different product more efficiently. Explain why specialisation and trade usually bring gains to both countries.

May/June 2013

The diagram indicates that a country can produce a product for less than the world price. What happens if it participates in international trade?

May/June 2014

Which argument would an importer be most likely to put forward to win consumer support for free trade?

May/June 2014

The table sets out cars and televisions produced per worker per week before trade and specialisation. country X: cars 2, televisions 6; country Y: cars 8, televisions 48. Each country concentrates on the product in which it has a comparative advantage and then trades using an exchange rate that is between their opportunity cost ratios. Which change would prevent the countries from specialising and trading?

May/June 2014

What might stimulate the expansion of the international division of labour?

May/June 2014

Using the information in the extracts, explain why New Zealand’s terms of trade were expected to ‘stabilise during 2013’.

May/June 2014

The table indicates the quantities of rice and wheat that two countries, X and Y, are able to produce when each nation allocates its resources evenly between rice and wheat production. Suppose each country then specialises in line with comparative advantage and exchanges goods with the other country. Which terms of trade would be advantageous to both countries?

May/June 2015

Coffee is cultivated in two main varieties, arabica and robusta. The table shows information about the four biggest coffee-producing countries in 2013-2014. What conclusion can be drawn from the table about output in these four countries?

May/June 2016

In 2007, oil was in short supply worldwide. The diagram illustrates oil consumption and production (billion tonnes) in 2007 for selected countries. What conclusion can be drawn from the diagram?

May/June 2016

Orders for durable US manufactured goods decreased by 7.3%. What could account for this shift in trade, and in what way would it have influenced the US balance of payments?

May/June 2016

Countries X and Y together supply the world with computers and wheat. At present, each country splits its resources evenly between the two goods and achieves the output shown below. How would total output change if each country were to specialise fully in the product for which it has a comparative advantage?

May/June 2016

Use production possibility diagrams to explain how specialisation and international trade can improve the standard of living of consumers in a country.

May/June 2016

Each diagram presents the production possibility curves for the two economies, X and Y, as they make food and clothes. In which diagram would both economies gain if they specialised in the good in which they have comparative advantage and traded at an exchange rate of 1 unit of clothes to 1.5 units of food?

May/June 2017

There are four countries, A, B, C and D, that trade with one another internationally. In the diagram, each circle shows a free trade area made up of the countries inside that circle. A country may be part of more than one free trade area. Any country outside a circle meets trade barriers. Which country has the best chance of gaining from free international trade?

May/June 2017

The table sets out the capability of two countries, P and Q, to make two goods, Y and Z. Which statement is correct?

May/June 2017

The table provides information on the carrying capacity and the number of British licensed registered ships over 100 tons from 2010 to 2014. What conclusion can be drawn about British shipping between 2010 and 2014?

May/June 2017

The graphs illustrate the production possibilities for commodities X and Y in two countries, M and N. What would happen if M and N agreed to trade the commodities at an exchange rate of 1Y for 3X?

May/June 2018

In the diagram, MN represents the production possibility curve for a country that has a comparative advantage in producing good Y. What could allow the country to consume the quantities of X and Y shown by point R?

May/June 2018

How does a customs union differ from a free trade area?

May/June 2018

A country is not involved in international trade, and its domestic market price is Pd. It then chooses to enter free trade, causing the market price to move up to the world price (Pw). What effect does this have on consumer surplus and producer surplus when the economy enters free trade?

May/June 2018

Use Table 1.1 to help you answer parts (i), (ii) and (iii).

May/June 2018

Hunters in Mozambique are trying to obtain wild honey from beehives. To locate the beehives, they follow birds called honeyguide birds, which are after the beeswax that is also present in the beehives. What does this suggest?

May/June 2019

Explain the benefits of free trade as indicated by the principle of comparative advantage.

May/June 2019

Economists have suggested that the most effective policy for encouraging development is ‘trade not aid’. What does this proposal imply?

May/June 2019

Which argument would an importer be most likely to use to win consumers’ support for free trade?

May/June 2020

The statements below concern possible gains from a rise in free trade. Which gain is least likely to occur in the short run?

May/June 2020

An economy that has long imposed substantial barriers to trade decides to move to completely free trade. Which outcome is most likely to rise in the short term?

May/June 2020

Explain why the theory of comparative advantage may not provide an accurate picture of the benefits of free trade.

May/June 2020

The African Union is made up of 55 developing countries. They decide to use a free-trade model to increase trade among member countries. In theory what do free-trade models tend to ignore?

May/June 2020

The African Union brings together 55 developing countries. They decide to use a free-trade model in order to increase trade among member countries. In theory what do free-trade models tend to ignore?

May/June 2020

Two statements are given. 1 One country can make a good at a lower opportunity cost than another country. 2 One country can make a larger amount of a good using the same amount of inputs as another country. What do these two statements describe?

May/June 2021

Which factors can increase the advantages a country obtains from international trade?

May/June 2021

Explain how a free trade area is different from a customs union and explain two reasons why countries move towards tariff-free trade.

May/June 2021

In 2000, Japan was Asia’s largest exporter of electrical components, but by 2018 it had fallen to 8th place. What might explain this change?

May/June 2022

Which option gives the correct description of absolute advantage?

May/June 2023

The diagram illustrates production possibility curves for India and Japan. If each country specialised in the product in which it has a comparative advantage, which combination of outputs would be produced?

May/June 2023

There are two countries, M and N. The graphs illustrate their production possibility frontiers for wheat and rice. Both countries are operating on their production possibility curves and, before specialisation, country M produces 60 units of wheat while country N produces 30 units of wheat. What will be the change in the world output of rice if both countries choose to specialise according to comparative advantage?

May/June 2023

Oil is in short supply across the world. The diagram illustrates oil consumption and oil production (billion tonnes) for selected countries. What conclusion can be drawn from the diagram?

May/June 2023

Country X and country Y each devote half of their resources to producing shoes and half to producing t-shirts. With half of the resources in each case, the outputs are: X shoes 4000 t-shirts 12000; Y shoes 2000 t-shirts 8000. What can be concluded from the data?

May/June 2023

Two countries each produce two products and wish to trade with one another. Explain the distinction between absolute advantage and comparative advantage, and consider whether comparative advantage is always the more important influence when each country decides whether to trade with the other.

May/June 2023

Countries X and Y each make goods M and N. They choose to specialise and then trade these goods without restrictions. In which circumstances would the gains from specialisation and free trade be expected to be smallest?

May/June 2024

A country’s terms of trade rose from 100 to 120. Which statements are correct? 1 The terms of trade have worsened. 2 A smaller quantity of exports is needed to buy the same quantity of imports. 3 The balance of payments must improve.

May/June 2024

The table displays the output of goods X and Y in China and the United States (US) before specialisation. If both China and the US allocate 50% of their resources to producing each product, what would the combined total output be once specialisation has taken place?

May/June 2024

Economists argue that trade involving many countries is better than trade between only two countries. Why is this the case?

May/June 2024

From Table 1.1:

May/June 2024

Explain two possible causes of a change in the terms of trade in an economy and assess which of these causes is likely to matter more for low-income countries.

May/June 2024

In 2020, a global pandemic occurred. High-income countries rapidly created a vaccine. Low-income countries constructed high-tech factories to manufacture large quantities of the vaccine for export. What accounts for this international division of labour?

May/June 2025

Country X and country Y each employ the same quantity of resources to make mobile phones and televisions. The table indicates the output of each item if every resource is devoted to producing that single item. What can be inferred about absolute advantage and comparative advantage? (Country X: televisions 400, mobile phones 200; Country Y: televisions 500, mobile phones 100)

May/June 2025

Identify one possible effect on firms in South Africa and one possible effect on the government in South Africa of such a high unemployment rate.

May/June 2025

In one year, the terms of trade index for an economy rose from 105 to 110. Explain two likely reasons for this change and consider the extent to which the change is likely to benefit the current account of the balance of payments of this economy.

May/June 2025

The diagram illustrates the impact of trade creation when a tariff is abolished. Which areas indicate the overall net gain for the domestic economy?

May/June 2025

It is argued that a free trade area delivers every benefit of customs union membership while avoiding every cost of customs union membership. Evaluate this statement.

May/June 2025

A free trade area gets every benefit linked to membership of a customs union while avoiding every cost linked to membership of a customs union. Evaluate this statement.

May/June 2025

Suggest two steps that a country might take to make its economy more open to freer international trade.

Oct/Nov 2004

Explain what is meant by the ‘equilibrium price’ of a good and the way it is determined in a free market.

Oct/Nov 2005

Explain the distinction between absolute and comparative advantage.

Oct/Nov 2006

In what way can opportunity cost be used to account for the pattern of international trade?

Oct/Nov 2008

Explain why trading internationally is usually more difficult than trading domestically.

Oct/Nov 2009

Compare the aims and features of a free trade area and an economic union.

Oct/Nov 2009

The table indicates the amounts of rice and wheat that two countries, X and Y, are able to produce when each one allocates its resources equally to rice and wheat production. Suppose each country then specialises according to comparative advantage and trades with the other. Which terms of trade would be beneficial for both countries?

Oct/Nov 2010

The table indicates the quantities of rice and wheat that two countries, X and Y, can produce when each country allocates its resources equally between rice and wheat production. Suppose each country now specialises in line with comparative advantage and then trades with the other country. Which terms of trade would make both countries better off?

Oct/Nov 2010

The table indicates the quantities of rice and wheat that two countries, X and Y, are able to produce when each nation allocates its resources evenly between rice and wheat production. Assume that each country then specialises in line with comparative advantage and exchanges goods with the other country. Which terms of trade would be advantageous to both countries?

Oct/Nov 2010

Since Sealand has abundant land and labour, and Fantasia has more labour than Sealand, while X requires much land but little labour and Y requires much labour but little land, what can be inferred about Sealand?

Oct/Nov 2011

Which pairing of export prices and import prices would produce the largest shift in a country’s terms of trade?

Oct/Nov 2011

The world is made up of Sealand and Fantasia. Both countries make two goods, X and Y. Good X requires a lot of land but only a small amount of labour. Good Y requires a lot of labour but only a small amount of land. Sealand has abundant land and labour. Fantasia has more labour than Sealand. What can be deduced from the above about Sealand?

Oct/Nov 2011

Explain what factors determine a country’s comparative advantage in production.

Oct/Nov 2011

Calculate the world price of rice in January 2002 approximately.

Oct/Nov 2011

Economists have argued that the most effective way to encourage development is ‘trade not aid’. What is implied by this proposal?

Oct/Nov 2011

The table sets out the output levels that three countries are able to produce. What is the most likely result?

Oct/Nov 2012

Which single combination of price changes has to lead to a worsening of the country’s terms of trade?

Oct/Nov 2012

Oil is in short supply worldwide. The diagram illustrates oil consumption and production (billion tonnes) in 2007 for selected countries. What conclusion can be drawn from the diagram?

Oct/Nov 2012

The diagram illustrates a market for a good that is provided partly by domestic production and partly by imports. Sh denotes domestic supply and Sm denotes imports. What is the level of consumption and the corresponding quantity of imports?

Oct/Nov 2012