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AP Microeconomics
Unit 2: Supply and Demand
2.8 International Trade and Public Policy
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What is the primary role of international trade in the global economy?
Enhances efficiency and promotes growth
International trade fosters economic growth by allowing nations to specialize in their most efficient
industries
Comparative advantage is determined by absolute productivity rather than opportunity cost.
False
What is the fundamental driver of international trade according to the study material?
Comparative advantage
In the example provided, Country A can produce 10 wheat or 20 textiles, meaning one unit of wheat costs
2
textiles.
In the example, neither country has a comparative advantage in wheat or
textiles
.
What are the two primary benefits of international trade for consumers?
Increased choice and lower prices
Match the benefit of international trade with the corresponding beneficiary.
1️⃣ Increased product variety
2️⃣ Expanded markets
3️⃣ Lower prices
International trade leads to a more
competitive
and efficient global economy.
What does comparative advantage refer to in the context of international trade?
Lower opportunity cost
In Country A, producing 1 unit of wheat costs
2
textiles.
Which of the following is a benefit of international trade for consumers?
Lower prices
Economies of scale reduce costs and improve profitability for
producers
in international trade.
What is the purpose of trade barriers such as tariffs, quotas, and embargoes?
Restrict or control trade
Tariffs are taxes imposed on imported goods, increasing their
cost
.
Match the type of trade barrier with its definition.
Tariffs ↔️ Taxes on imported goods
Quotas ↔️ Quantitative limits on imports
Embargoes ↔️ Complete trade bans
Consumers gain from increased product variety and lower
prices
What is the primary purpose of trade barriers?
Restrict international trade
The WTO oversees
global
trade rules and resolves disputes.
The U.S.-Mexico-Canada Agreement replaced the
NAFTA
International trade enhances efficiency and promotes
economic growth
worldwide.
What is the opportunity cost for Country A to produce one unit of wheat?
2 textiles
Neither Country A nor Country B has a comparative advantage in wheat or textiles because their
opportunity costs
are the same.
Consumers benefit from lower prices due to foreign
competition
What is the overall effect of international trade on the global economy?
More competitive and efficient
Match the trade barrier with its purpose:
Tariffs ↔️ Protect domestic industries
Quotas ↔️ Reduce foreign competition
Embargoes ↔️ Apply political or economic pressure
Trade barriers are measures governments implement to restrict or control international
trade
What are tariffs in international trade?
Taxes on imported goods
A 10%
tariff
on imported cars raises their price for consumers.
Quotas are quantitative limits on the number of imported
goods
What is an embargo in international trade?
Complete trade ban
Embargoes can lead to trade
disruption
and market instability.
What is the primary purpose of trade agreements?
Reduce trade barriers
The World Trade Organization (WTO) oversees global trade
rules
What does NAFTA aim to eliminate?
Trade barriers in North America
NAFTA facilitates
cross-border
trade in goods, services, and investments.
What are subsidies in international trade?
Financial support to domestic producers
Free Trade Agreements (FTAs) are agreements to eliminate or reduce trade
barriers
Match the trade policy with its impact on domestic industries:
Tariffs ↔️ Protects domestic producers
Quotas ↔️ Restricts supply
Subsidies ↔️ Lowers production costs
FTAs ↔️ Provides access to larger markets
What is the impact of U.S. tariffs on imported steel?
Protects domestic steel producers
See all 57 cards
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