4.2.1 Conditions That Prompt Trade

• Trade involves the movement of resources across national borders
• What do global markets encompass in addition to diverse economies and cultures?

  Regulatory environments
• Trade can occur for profit, necessity, or to leverage comparative advantages
• Cultural considerations in domestic markets are more diverse than in global markets.

  False
• What is simplified in domestic markets due to national laws?

  Legal and regulatory framework
• Domestic markets are limited to a single country
• How do cultural considerations differ between domestic and global markets?

  Relatively uniform vs highly diverse
• Trade involves the exchange of goods and services
• Global markets have fewer competitors compared to domestic markets.

  False
• What are the primary reasons for trade according to the text?

  Profit, necessity, comparative advantage
• Comparative advantage states a country can produce a good at a lower opportunity cost
• Specialization and trade based on comparative advantage increase global efficiency.
• Match the country with its comparative advantage:

  Country 1 ↔️ Product A

  Country 2 ↔️ Product B
• When does absolute advantage occur in trade?

  More production with same resources
• Superior technology, lower labor costs, and abundant natural resources are factors leading to absolute advantage
• Absolute advantage encourages specialization and trade, leading to economic benefits.
• What is the key difference between absolute and comparative advantage?

  Opportunity cost vs efficiency
• Trade occurs to meet needs, leverage comparative advantages, or generate profit
• Global markets include diverse economies, cultures, and regulatory environments.
• What is the defining characteristic of comparative advantage in trade?

  Lower opportunity cost
• Specialization based on comparative advantage leads to increased global efficiency
• What is comparative advantage in international trade?

  Lower opportunity cost
• Specializing in comparative advantages leads to increased efficiency and more goods available globally
• Absolute advantage contrasts with comparative advantage by considering the opportunity cost of production.
• What are three factors that can give a country an absolute advantage?

  Technology, labor, resources
• Specialization and trade, driven by absolute advantage, increase global efficiency
• Arrange the factors of production in order of their primary contribution to trade

  1️⃣ Land

  2️⃣ Labor

  3️⃣ Capital

  4️⃣ Entrepreneurship
• Match the factor of production with its impact on trade:

  Land ↔️ Exports natural resources

  Labor ↔️ Exports labor-intensive goods

  Capital ↔️ Exports high-tech goods

  Entrepreneurship ↔️ Exports new products
• What is the primary purpose of trade between countries?

  Profit or comparative advantage
• Global markets are characterized by diverse economies, cultures, and regulations.
• Specializing in comparative advantages and trading enhances overall production efficiency
• What are three factors that can give a country an absolute advantage?

  Superior technology, lower labor costs, abundant natural resources
• Natural resources like minerals, fertile soil, and oil can lead countries to export their resources.
• Lower labor costs in a country can make it more competitive in manufacturing goods
• What do demand and supply represent in global trade?

  Buyers and sellers
• The price of a product in the global market is determined by the interaction of demand and supply.
• Global trends and economic conditions significantly impact both demand and supply in trade
• What are the key drivers of demand in global trade?

  Consumer preferences, economic conditions, government policies
• The price of a product in the global market is determined by the interaction of demand and supply
• Global trends and economic conditions significantly impact both demand and supply in trade.