Chapter 2 - Free Trade and Protection

Question 1

Trade Liberalisation

Answer 1

The removal or reduction of restrictions or barriers on the free exchange of goods between nations
Tariffs and Quotas

Question 2

Comparative Advantage

Answer 2

The ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity

Question 3

Absolute Advantage

Answer 3

The ability of a party to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Question 4

Tariff

Answer 4

Tax placed on imports

Question 5

Subsidy

Answer 5

Grants or payments made by government to domestic producers

Question 6

Bilateral vs multilateral trade agreements

Answer 6

Multilateral trade agreements involve three or more countries without discrimination between those involved, whereas bilateral trade agreements consist between two countries

Question 7

Define protection

Answer 7

policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors.

Question 8

Arguments for protection

Answer 8

Infant industry argument
Diversification argument
Anti-dumping argument
National security argument
Cheap foreign labour argument

Question 9

Trade intensity formula

Answer 9

Exports and Imports / GDP