Business 0450 · IGCSE · Business and the international economy
Business and the international economy — practice question
KLG operates in country X. It makes electrical parts and sells them to washing machine manufacturers in country X. The Managing Director is intending to move the business to country Y, a low-cost country. She stated: ‘This would let us pay employees low wages for long hours because there are few legal controls over employment and health and safety. KLG cannot be both ethical and profitable. Changes in exchange rates and import tariffs could create difficulties for us once we begin exporting.’
(a)[2]
What do you understand by the term ‘import tariff’?
(b)[2]
Identify two advantages of specialisation for KLG.
(c)[4]
Explain how a shift in exchange rates could affect KLG when it exports.
(d)[6]
Identify and explain two factors, apart from exchange rates and import tariffs, that KLG should take into account when choosing a location for relocation.
(e)[6]
The Managing Director believes that ‘KLG cannot be both ethical and profitable’. Do you agree? Justify your view.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A tax levied on goods entering a country” …