4.7.1 Benefits of International Trade

• Germany exports cars to the USA, and the USA exports software to Germany.


  True
• Specialization allows countries to focus on producing goods and services they are most efficient
• What is the formula for the Terms of Trade?

  \frac{\text{Export Prices}}{\text{Import Prices}}</latex>
• What is a key benefit of international trade regarding consumer choice?

  Increased variety
• Why is apparel from Vietnam often more affordable than domestic clothing?

  Lower production costs
• What are the two primary activities involved in international trade?

  Exporting and importing
• Japan imports crude oil from Saudi Arabia to power its industries
• What is the term for the reduction in average costs due to large-scale production?

  Economies of scale
• What are two significant advantages derived from international trade?

  Economies of scale, increased productivity
• Increased productivity occurs when countries specialize in producing goods they are most efficient at.


  True
• What is the definition of international trade?

  Exchange of goods and services
• The terms of trade are the ratio of export prices to import prices.


  True
• Increased consumer choice allows consumers to access goods and services not produced domestically
• Access to resources not available domestically is essential for countries with limited natural resources.
• Order the factors that contribute to lower prices through international trade:

  1️⃣ Specialization

  2️⃣ Competition

  3️⃣ Innovation

  4️⃣ Efficiency
• Technological diffusion refers to the spread of new technologies across countries and industries
• What does international trade allow consumers to access that is not available domestically?

  Tropical fruits
• International competition encourages domestic industries to innovate and improve quality.


  True
• Match the benefit of international trade with its description:

  Wider Variety of Goods ↔️ Consumers can access goods not produced domestically

  Specialization ↔️ Countries focus on efficient production

  Competition ↔️ Encourages innovation and lower prices
• Lower prices for consumers result from increased international competition
• Lower prices for consumers complement increased consumer choice in international trade.


  True
• Match the key components of international trade with their definitions:

  Exports ↔️ Goods and services sold to foreign markets

  Imports ↔️ Goods and services bought from foreign markets

  Trade Balance ↔️ Difference between exports and imports
• South Korea's focus on electronics manufacturing has led to higher productivity in that sector.


  True
• Economies of scale reduce average costs by spreading fixed costs over a greater number of units
• Match the concept with its related outcome:

  Specialization ↔️ Increased productivity

  Competition ↔️ Lower prices
• Exports involve selling goods and services to other countries
• What does the trade balance measure?

  Exports minus imports
• Lower prices for consumers result from increased international competition.


  True
• What is the direct effect of increased competition on prices?

  Lower prices
• Economies of scale occur when fixed costs are spread across more units, reducing average costs.


  True
• What is technological innovation?

  Development of new technologies
• Economic interdependence between countries fosters diplomatic cooperation.


  True