Economics Unit 3 Topic 1

The fundamental economic advantage of free world trade is:

• the easing of political tensions between nations

• all nations will develop similar industries

• all nations will share equally in the world's wealth

• a more efficient allocation of resources

Which of the following organisations is called upon to make a ruling when two nations

disagree on terms of tariff introductions?

• The United Nations

• The International Monetary Fund

• The World Trade Organisation

• The World Bank

Which of the following would most likely decrease demand for all Australian exports?

• a 10% appreciation in the AUD

• a 15% drop in the Australian dollar

• increased government incentives to boost Australian exports

• 15% improvement in the global share market index in 3 months

International trade directly increases the standard of living in a country because it:

• creates employment opportunities in import competing industries

• enables the government to increase it's revenue through tariff collections

• increases the range of goods and services available to consumers

• overcomes high transportation costs

Refer to the following table. Which country has a comparative advantage in the production of Coal?

• Country A

• Country B

• both Country A & B

• neither Country A or B

Which of the following is a potential disadvantage of free trade agreements?

• Increased consumer choice

• Loss of jobs in certain industries

• Lower prices for goods

• Improved international relations

Which economic theory suggests that countries should specialize in producing goods where they have a lower opportunity cost?

• Absolute advantage

• Comparative advantage

• Protectionism

• Mercantilism

Increasing openness of national economies will result in

• a decline in the benefits of Regional Trading Blocs

• increased trade until a country can become fully self-sufficient

• increased benefits based on specialisation and comparative advantage

• decreased benefits based on the inevitability of ever increasing import payments

Assume the UK Supermarket Chain Sainsbury entered Australia and simultaneously there was a massive increase of imports of a new Hyundai SUV. The impact on the Circular Flow Model would be

• an increase in the Circular Flow of Income

• an increase in the flow as a result of the UK investment and a decrease in the flow as a result of the motor vehicle imports

• a decrease in the Circular Flow of Income

• a decrease in the flow as a result of the UK investment and an increase in the flow as a result of the motor vehicle imports

Competitive advantage is exemplified by

• countries competing strongly regarding a common export component

• one export business being larger than its competitors due to its loyal customer base

• a firm able to be a low-cost producer through continuing innovation compared to its competitors

• a country able to produce all of its commodities at a lower absolute cost than any of its trading partners