international Trade Saq

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What does the law of comparative advantage state?

A country should specialize in goods it can produce most efficiently.

What does the law of absolute advantage state?

Each country should specialize in goods it can produce more efficiently than other countries.

What are the terms of trade?

The ratio of export prices to import prices.

What does the first assumption underlying comparative advantage ignore?

The law of diminishing marginal returns. Signup and view all the answers

What is assumed about the mobility of factors of production?

Perfect mobility. Signup and view all the answers

Which costs are ignored in the assumptions?

Transport costs. Signup and view all the answers

What strategic reasons may lead to ignoring comparative advantage?

Self-sufficiency. Signup and view all the answers

How does climate give Ireland a comparative advantage?

Suitable for agriculture (e.g., beef, lamb). Signup and view all the answers

What is Ireland's corporate tax rate advantage?

12.5% low corporation tax. Signup and view all the answers

Why is Ireland's skilled labor force an advantage?

High availability and low training costs. Signup and view all the answers

How do natural resources contribute to Ireland's comparative advantage?

Access to fish and other resources. Signup and view all the answers

How does the use of English language benefit Ireland?

It is the international language of business. Signup and view all the answers

What role does infrastructure play in Ireland's comparative advantage?

Improved productive capacity. Signup and view all the answers

How does EU membership benefit Ireland?

Avoids trade barriers. Signup and view all the answers

Why is a stable political system advantageous?

It attracts investment and business. Signup and view all the answers

What does the fair trade movement seek?

Equity in international trade and better trading conditions for developing nations Signup and view all the answers

What is national competitiveness?

Ability to compete successfully in international markets. Signup and view all the answers

How do transport costs affect national competitiveness?

Increase production costs and prices of exported goods. Signup and view all the answers

Why is it important for a country to trade for the remainder of its requirements?

To maximize efficiency and benefit from specialization. Signup and view all the answers

What does the assumption of perfect mobility of factors of production entail?

The ability to easily switch factors of production, such as labor. Signup and view all the answers

How does Ireland's access to water contribute to its comparative advantage

It supports agriculture and other industries requiring significant water resources. Signup and view all the answers

What is one impact of Ireland's stable political system on its economy?

It enhances investor confidence and business stability. Signup and view all the answers

How does a weakening euro against the pound affect Eurozone exports?

Makes Eurozone exports more attractive in the UK. Signup and view all the answers

What are visible exports?

Physical goods leaving Ireland, bringing money in (e.g., beef). Signup and view all the answers

What are visible imports?

Physical goods entering Ireland, with money leaving (e.g., cars). Signup and view all the answers

What are invisible exports?

Services provided to foreign customers, bringing money in (e.g., French tourists in Dublin). Signup and view all the answers

What are invisible imports?

Services provided to Irish people abroad, with money leaving (e.g., Irish tourists in Paris). Signup and view all the answers

What is the balance of payments?

A record of all economic and financial transactions between a country and the rest of the world Signup and view all the answers

What indicates a balance of payments surplus?

Economic growth and high export demand. Signup and view all the answers

What can cause a balance of payments deficit?

Increased imports, domestic economic issues, and national debt rise. Signup and view all the answers

Why might a country use trade protection?

To create jobs, protect industries, and prevent dumping. Signup and view all the answers

What is dumping in trade?

Selling goods abroad at lower prices than at home. Signup and view all the answers

What characterizes an open economy

Engages in international trade, importing and exporting goods and services Signup and view all the answers

What is one advantage of international trade for economic growth

Injects money into the economy. Signup and view all the answers

How does international trade affect employment?

Creates jobs in exporting firms. Signup and view all the answers

What is one disadvantage of international trade related to the environment?

Pollution from transportation. Signup and view all the answers

Why might over-dependence on foreign markets be a disadvantage?

Vulnerability during global disruptions (e.g., COVID-19). Signup and view all the answers

What is a closed economy?

An economy that does not engage in international trade (e.g., North Korea). Signup and view all the answers

What is a tariff?

A tax on imports to make them more expensive than domestic goods. Signup and view all the answers

What is a quota in trade?

A limit on the amount of goods that can be imported. Signup and view all the answers

What is an embargo?

A ban on trade with a particular country. Signup and view all the answers

How do subsidies help exporters?

By lowering the price of goods in foreign markets. Signup and view all the answers

What is currency devaluation?

Making exports cheaper by lowering the value of the national currency. Signup and view all the answers