Paper 3 SAQs (international + development economics)
*Condensed for revision purpose
*The questions included are based on pure economic knowledge
3.1 international trade
M19/3/ECONO/HP3/ENG/TZ0/XX/M
Outline the reason why Country X should specialize in the production of apples and Country Y should
specialize in the production of bananas. [2]
● Country X should specialise because the opportunity cost is lower
● Specialisation should increase output
● This may result in lower prices
Outline one reason why it might not be in a country’s best interests to specialize according to the
principle of comparative advantage. [2]
● specialization may make it difficult for the economy to diversify, thus maintaining the risk of
vulnerability to market conditions
State one administrative barrier that Country Z could use in order to restrict imports. [1]
● Requirements for packaging/labelling
N18/3/ECONO/HP3/ENG/TZ0/XX/M
State two functions of the WTO. [2]
● promotes trade liberalization
● settles trade-related disputes
Explain one possible advantage and one possible disadvantage for the San Marcus economy of the
decision to join the WTO and slowly liberalize trade. [4]
● Advantage: since tariffs and other trade restrictions will be removed, consumers will enjoy cheaper and
a greater variety of imports
● Disadvantage: overspecialization may render the economy vulnerable to changes in the prices of exports
and imports
M18/3/ECONO/HP3/ENG/TZ0/XX/M
Distinguish between the terms absolute advantage and comparative advantage. [2]
● absolute advantage means that one country can produce more of a product than another country with a
given level of resources (or that production of one product requires fewer resources than production of
the other product in the case of absolute advantage), while comparative advantage means that the
opportunity cost of producing a good is lower for one country than for another
N17/3/ECONO/HP3/ENG/TZ0/XX/M
Explain one way in which the effect of imposing a tariff is likely to be different from that of imposing
a quota. [2]
● a quota is a quantitative restriction so it affects the volume of imports while a tariff is a tax on imports so
it affects the price of imports
M17/3/ECONO/HP3/ENG/TZ0/XX/M
Define the term comparative advantage. [2]
● When a country can produce a product at a lower opportunity cost than another country
Explain two limitations of the theory of comparative advantage. [4]
● The assumption that there are zero transport costs may not hold in the real world – transport costs may
outweigh any comparative advantage
● Application of comparative advantage may not bring about the benefits inherent in the theory, for
example, over-specialization on primary products might make the economy vulnerable to changes in the
market & may lead to diseconomies of scale
Compiled by @oatsnwaffles
*Condensed for revision purpose
*The questions included are based on pure economic knowledge
3.1 international trade
M19/3/ECONO/HP3/ENG/TZ0/XX/M
Outline the reason why Country X should specialize in the production of apples and Country Y should
specialize in the production of bananas. [2]
● Country X should specialise because the opportunity cost is lower
● Specialisation should increase output
● This may result in lower prices
Outline one reason why it might not be in a country’s best interests to specialize according to the
principle of comparative advantage. [2]
● specialization may make it difficult for the economy to diversify, thus maintaining the risk of
vulnerability to market conditions
State one administrative barrier that Country Z could use in order to restrict imports. [1]
● Requirements for packaging/labelling
N18/3/ECONO/HP3/ENG/TZ0/XX/M
State two functions of the WTO. [2]
● promotes trade liberalization
● settles trade-related disputes
Explain one possible advantage and one possible disadvantage for the San Marcus economy of the
decision to join the WTO and slowly liberalize trade. [4]
● Advantage: since tariffs and other trade restrictions will be removed, consumers will enjoy cheaper and
a greater variety of imports
● Disadvantage: overspecialization may render the economy vulnerable to changes in the prices of exports
and imports
M18/3/ECONO/HP3/ENG/TZ0/XX/M
Distinguish between the terms absolute advantage and comparative advantage. [2]
● absolute advantage means that one country can produce more of a product than another country with a
given level of resources (or that production of one product requires fewer resources than production of
the other product in the case of absolute advantage), while comparative advantage means that the
opportunity cost of producing a good is lower for one country than for another
N17/3/ECONO/HP3/ENG/TZ0/XX/M
Explain one way in which the effect of imposing a tariff is likely to be different from that of imposing
a quota. [2]
● a quota is a quantitative restriction so it affects the volume of imports while a tariff is a tax on imports so
it affects the price of imports
M17/3/ECONO/HP3/ENG/TZ0/XX/M
Define the term comparative advantage. [2]
● When a country can produce a product at a lower opportunity cost than another country
Explain two limitations of the theory of comparative advantage. [4]
● The assumption that there are zero transport costs may not hold in the real world – transport costs may
outweigh any comparative advantage
● Application of comparative advantage may not bring about the benefits inherent in the theory, for
example, over-specialization on primary products might make the economy vulnerable to changes in the
market & may lead to diseconomies of scale
Compiled by @oatsnwaffles
