IBDP Economics HL – The global economy – Benefits of international trade -Paper 1 Exam Style Practice Questions
Benefits of international trade Paper 1?
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Exam Style Question for IBDP Economics HL- Benefits of international trade -Paper 1
Question
Countries often specialize and trade according to the theory of comparative advantage. Explain the limitations of this approach.
▶️Answer/Explanation
Answers may include:
- Terminology: comparative advantage
- Explanation: of any limitations, such as it may lead to excessive specialization, specialization according to comparative advantage may not allow necessary structural changes to occur in an economy, viewed as the “rich man’s theory” by poorer nations as it mostly benefits the MDCs/MNCs, unrealistic assumptions, e.g. immobile and fixed factors of production, fixed technology, free trade, an absence of transport costs
- Diagram: PPC diagram to illustrate comparative advantage.