Free trade and protectionism: Benefits and costs of free trade

Overview

Recall questions on The benefits and costs of free trade.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is meant by free trade?

   Model answer

   Free trade occurs when goods and services can be exchanged between countries without government-imposed barriers such as tariffs, quotas, or other restrictions.

2. 2

   How does free trade benefit consumers in terms of product variety?

   Model answer

   Consumers gain access to a wider variety of goods and services from different countries, increasing consumer choice.

3. 3

   Why might free trade lead to lower prices for consumers?

   Model answer

   Increased competition and access to goods produced more efficiently abroad drives prices down.

4. 4

   How does free trade promote greater efficiency in production?

   Model answer

   Countries can specialise in producing goods where they have lower opportunity costs, improving productive efficiency.

5. 5

   What drives increased economic growth under free trade?

   Model answer

   Higher exports, increased investment, and productivity gains contribute to faster economic growth.

6. 6

   How can free trade harm infant industries?

   Model answer

   New domestic industries may be unable to develop when facing competition from established foreign producers with lower costs.

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