International Trade MCQ 1

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.