Questions and Answers
What is the main principle behind the law of comparative advantage?
What is the law of absolute advantage based on?
What does a country's terms of trade represent?
What is national competitiveness related to?
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What is the benefit of international trade according to the law of comparative advantage?
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What does a country's terms of trade influence?
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How do transport costs affect Irish goods?
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What would a weakening of the euro against the pound sterling do to eurozone exports?
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What happens to the cost of production in Ireland?
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How does the corporation tax rate in Ireland affect national competitiveness?
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Why is infrastructure important for national competitiveness?
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Study Notes
International Trade
- International trade involves specialization and exchange of goods and services between countries.
Law of Comparative Advantage
- States that a country should specialize in producing goods/services in which it has a relative efficiency advantage.
- This leads to trade for remaining requirements.
Law of Absolute Advantage
- States that each country should specialize in producing goods/services it can produce more effectively than others.
- Focuses on the capability to produce more efficiently than other countries.
Terms of Trade
- The ratio of export prices to import prices.
- Indicates how much a country pays for imports or how much its exports earn in terms of imports.
National Competitiveness
- Refers to the overall ability of a country's enterprises to compete successfully in international markets.
- Measures a country's success in selling goods and services abroad compared to its competitors.
National Competitiveness Factors
- Transport Costs: Ireland's location necessitates air or sea transport for all physical goods, resulting in higher production costs and prices for Irish goods.
- Exchange Rates: A weakening of the euro against the pound sterling would increase the attractiveness of eurozone exports to the UK market.
- Cost of Production: Increased costs are typically passed on to customers, affecting the prices of Irish goods and services.
- Property Prices: High property prices can impact national competitiveness by increasing business costs and affecting the overall cost of doing business.
- Corporation Tax: The corporation tax rate in Ireland can influence national competitiveness by affecting the cost of doing business and influencing investment decisions.
- Infrastructure: The quality and availability of infrastructure can impact national competitiveness by affecting the ease and cost of doing business in Ireland.
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Description
Quiz on international trade, covering the laws of comparative and absolute advantage, and their role in determining a country's production and trade decisions.