DP Economics Questionbank

Plot and label the production possibility curves for Country J and for Country H, assuming constant opportunity costs, on Figure 4.

State two functions of the World Trade Organization (WTO) (paragraph [1]).

Define the term absolute advantage indicated in bold in the text (paragraph [3]).

State two functions of the World Trade Organization (WTO) (paragraph [1]).

Define the term free trade indicated in bold in the text (paragraph [1]).

A new government in Alpha decides to abolish the price ceiling. Instead, it opens the rice market to imports. The world supply of rice is perfectly elastic; any quantity can be bought for $3 per kilogram.

Using the diagram, calculate the import expenditures on rice.

Define the term comparative advantage.

Explain two limitations of the theory of comparative advantage.

Using the diagram, calculate the opportunity cost of producing one tonne of bananas in Country A.

Define the term comparative advantage indicated in bold in the text (paragraph [5]).

State two functions of the WTO.

Outline the reason why Country X should specialize in the production of apples and Country Y should specialize in the production of bananas.

Sketch and label a diagram to illustrate comparative advantage between Country X and Country Y on Figure 4.

Figure 4