A Level H2 Economics International Economics Quiz

A-Level Economics H2 Quiz - International Economics (Answer Key)

Total Marks: 40
Topic: International Economics

Section A: Fundamentals (Q1–5, 1 mark each)

Q1. B – Comparative advantage
Teaching note: Comparative advantage (Ricardo) says specialise where opportunity cost is lowest, not where absolute output is highest. Absolute advantage (A) is about productivity, not opportunity cost.

Q2. B – A tax on imported goods
Teaching note: Tariff = customs duty on imports. Quota (A) is quantity limit; subsidy (C) is payment; VER (D) is voluntary restraint.

Q3. B – Trade in goods and services plus income flows
Teaching note: Current account = goods, services, primary income, secondary income. Financial account (A, C, D) records capital flows.

Q4. B – More expensive in US dollar terms
Teaching note: SGD appreciation means 1 SGD buys more USD; US buyers need more USD for same SGD price → S’pore exports pricier for them.

Q5. B – Free movement of goods among members
Teaching note: Trading blocs (e.g. ASEAN) reduce internal barriers; external tariffs may vary (not necessarily higher for all, A).

Section B: Data and Diagrams (Q6–10)

Q6. (3 marks)

• Draw final EV market: D_EV shifts right → higher P and Q of EVs. (1)
• Lithium is derived demand: higher EV output raises demand for lithium → D_li shifts right. (1)
• World lithium market: P_lithium and Q_lithium rise. Label axes (P, Q), curves, new equilibrium. (1)
  Teaching note: Must show input market, not just EV market.

Q7. (2 marks)
Terms of Trade (ToT) = (Export Price Index / Import Price Index) × 100
= (130 / 110) × 100 = 118.2 (or 118)
Working: 130 ÷ 110 = 1.1818 → ×100 = 118.2.
Teaching note: ToT > 100 means improving terms; country buys more imports per unit export.

Q8. (2 marks)

• Without tariff, imports = D_d – S_d at P_w = (say 100 – 20) = 80 units (from context).
• With tariff P_t = $360, domestic supply = 40, demand = 80, imports = 40 units. (1)
• Tariff reduces imports from 80 to 40 units (by 40 units). (1)
  Teaching note: Use diagram values: P_w=$300, P_t=$360, Q_s=40, Q_d=80 → imports 40.

Q9. (2 marks)
One reason: Quota gives certainty on quantity (e.g. protect domestic jobs to a fixed limit) whereas tariff may still allow volume to rise if demand grows. (2) Or: quota avoids tariff revenue going to government, instead rents may go to licence holders.
Teaching note: Need a distinct reason from tariff; not “because it’s a limit”.

Q10. (2 marks)

• Nation A openness increased from 120% to 145% (rising integration). (1)
• Nation B decreased from 90% to 78% (declining trade reliance). (1)
  Teaching note: Compare both directions, not just one.

Section C: Structured and Evaluation (Q11–20)

Q11. (4 marks)
Define comparative advantage: lower opp cost. (1)
Example: S’pore & Malaysia; S’pore better at electronics, Malaysia at palm oil; opp cost of electronics lower in S’pore. (1)
Specialisation → each produces more of comparative-advantage good. (1)
Trade → combined output exceeds self-sufficiency (gain from trade). (1)
Teaching note: Must show opportunity cost logic, not just “they are good at it”.

Q12. (4 marks)
Diagram: D_d, S_d, world price P_w; subsidy shifts S_d down to S_d+sub → higher domestic Q, lower price to consumers. (2)
Govt expenditure = subsidy per unit × new Q_s. (1)
Expands domestic output, may reduce imports. (1)
Teaching note: Label subsidy wedge, new equilibrium.

Q13. (5 marks)
For: infant industries need protection to achieve scale/efficiency (2); externalities of learning. (1)
Against: risk of permanence, rent-seeking, consumer cost. (1)
Judgement: justified temporarily with exit plan. (1)
Marking: 2+2+1 structure.

Q14. (4 marks)
Appreciation → exports dearer, imports cheaper. (1)
Diagram: exchange rate ↑, net exports (NX) fall on AD/CA schedule. (1)
Elastic import demand → volume of imports rises substantially, expenditure rises. (1)
Current account worsens (deficit widens). (1)

Q15. (4 marks)
From chart: Vietnam & Malaysia rose, Thailand flat. (1)
Factor 1: Vietnam lower labour costs / supply chain shift from China. (1)
Factor 2: Malaysia existing semiconductor base; Thailand political/slowdown. (1)
Conclude differing locational advantages. (1)

Q16. (6 marks)
Yes gains: tech transfer, cheaper goods, scale. (2)
No / risks: inequality, fragile external dependence, cultural loss. (2)
Eval: net depends on policies, absorptive capacity. (2)
Descriptors: 2 for points each side, 2 for balanced judgement.

Q17. (5 marks)
Diagram: D, S, S_w; tariff raises price P_w→P_t. (1)
CS falls by a+b+c+d. (1)
PS rises by a. (1)
Govt revenue c; DWL = b+d. (2)
Teaching note: label areas.

Q18. (3 marks)
Technical standards as NTB raise compliance cost for Partner D. (1)
Extract: 12% rejected → effective barrier. (1)
Reduces trade despite agreement; like invisible tariff. (1)

Q19. (5 marks)
Not necessarily: deficit may fund investment (2); mirror of capital inflow (1).
But if unsustainable → currency pressure (1).
Judgement: context-dependent (1).

Q20. (6 marks)
Trade creation: bloc members buy cheaper internally → efficiency. (2)
Trade diversion: shift from efficient external to less efficient member → loss. (2)
Eval: net depends on pre-bloc tariffs & complementarity. (2)