3.2.4.1 Importance of international trade

• Comparative advantage means countries specialize in producing goods they can make more efficiently than others.


  True
• Larger production volumes from exporting can allow firms to achieve lower average costs
• International trade refers to the exchange of goods and services between countries
• Why do countries trade with each other if they lack natural resources or raw materials?

  To access resources
• Order the following reasons why countries engage in international trade:

  1️⃣ Comparative Advantage

  2️⃣ Access to Resources

  3️⃣ Economies of Scale

  4️⃣ Specialization
• Importation allows countries to acquire raw materials and goods they lack.


  True
• Countries import resources they lack domestically to produce a wider range of goods
• What are examples of trade barriers that can restrict international trade?

  Tariffs and quotas
• Arrange the following challenges of international trade in order of their impact on trade flows:

  1️⃣ Trade Barriers

  2️⃣ Transportation Costs

  3️⃣ Currency Exchange Rates

  4️⃣ Political Instability
• Fluctuations in currency exchange rates can affect the competitiveness of exports and imports.


  True
• What is comparative advantage in international trade?

  Specializing in efficient production
• Steps leading to improved living standards through international trade

  1️⃣ Countries import raw materials

  2️⃣ Firms produce wider range of goods

  3️⃣ Consumers access affordable goods

  4️⃣ Living standards improve
• Match the benefit of international trade with its description:

  Comparative Advantage ↔️ Specializing in efficient production

  Access to Resources ↔️ Importing raw materials

  Economies of Scale ↔️ Lowering average production costs
• Countries can specialize in producing the goods they can make most efficiently and then trade for other goods they need
• The benefits of international trade are always evenly distributed across all countries.

  False
• Import competition in international trade can lead to job displacement
• Trade increases market size and boosts exports, leading to higher GDP.


  True
• What is the primary goal of international trade under comparative advantage?

  Improve overall productivity
• Exporting allows firms to lower their average costs and become more competitive.


  True
• Fluctuations in currency exchange rates can affect the competitiveness of exports and imports
• Trade barriers such as tariffs and quotas can restrict trade and raise prices
• Match the reason for international trade with its description:

  Comparative Advantage ↔️ Specializing in efficient production

  Access to Resources ↔️ Importing raw materials

  Economies of Scale ↔️ Producing larger volumes
• International trade enhances economic growth by increasing market size and boosting exports
• Resource-poor countries like Japan rely on international trade to import necessary resources.

  True
• How does international trade lead to economies of scale?

  Larger production volumes
• Order the challenges associated with international trade from least to most severe based on their potential disruption to trade flows

  1️⃣ Language and cultural differences

  2️⃣ Transportation costs

  3️⃣ Currency exchange rates

  4️⃣ Trade barriers

  5️⃣ Political instability
• What is one negative impact of import competition on domestic industries?

  Job displacement
• Match the positive impact of international trade with its description:

  Increased Economic Growth ↔️ Stimulates GDP through exports

  Technological Transfer ↔️ Fosters innovation and development

  Stronger International Relations ↔️ Promotes diplomatic ties