Question 1

Define international specialisation.

Accepted Answer

International specialisation occurs when countries concentrate on producing particular goods or services in which they have a comparative advantage. This leads to increased efficiency and output on a global scale. For example, Japan specialises in electronics while Brazil specialises in coffee production.

Question 2

Explain the concept of absolute advantage.

Accepted Answer

Absolute advantage exists when a country can produce a good or service using fewer resources than another country. For example, if Country A can produce 10 cars with 5 workers and Country B needs 10 workers to produce 10 cars, Country A has an absolute advantage in car production.

Question 3

Explain the concept of comparative advantage.

Accepted Answer

Comparative advantage exists when a country can produce a good or service at a lower opportunity cost than another country. Even if a country has absolute advantage in everything, it benefits from specializing in what it produces relatively better. For example, although Country A can produce both cars and computers better than Country B, it might have a comparative advantage in computers if giving up car production allows them to produce more computers.

Question 4

What is the role of opportunity cost in determining comparative advantage?

Accepted Answer

Opportunity cost is key. A country has a comparative advantage in producing a good if its opportunity cost of producing that good is lower than another country's. This means it sacrifices less of other goods to produce it.

Question 5

Define free trade and provide an example.

Accepted Answer

Free trade is a policy where goods and services can be traded between countries without any government-imposed restrictions such as tariffs or quotas. An example is the trade of agricultural products between the US and Canada under the North American Free Trade Agreement (NAFTA), now USMCA.

Question 6

Describe two benefits of international trade.

Accepted Answer

Increased choice: Consumers have access to a wider variety of goods and services. Lower prices: Increased competition from foreign producers can lead to lower prices for consumers.

Question 7

How can specialisation and trade lead to increased global output?

Accepted Answer

Specialisation allows countries to focus on producing what they are best at, increasing efficiency. Trade then allows countries to exchange these goods, meaning more of everything is produced globally.

Question 8

Discuss a limitation of international specialisation.

Accepted Answer

Over-reliance on a single industry can make a country vulnerable to changes in global demand or supply of that product. For example, a country specializing only in oil is vulnerable to a drop in oil prices.

Question 9

Explain how trade can benefit consumers.

Accepted Answer

Trade increases access to cheaper goods and services. This effectively increases consumer purchasing power and allows them to enjoy a higher standard of living, as they can buy more with their money.

International specialisation

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