Rivoria’s trade in electronic components

Read the extracts and answer the questions that follow.

Text A — Imported components

1. Rivorian appliance manufacturers import semiconductors and sensors that are not produced domestically. These imported resources have allowed firms to make higher-quality refrigerators and washing machines.

2. Foreign suppliers charge lower prices than the prices Rivorian appliance manufacturers previously paid for components. Appliance firms have reduced unit costs, invested in automation and begun exporting to neighbouring countries.

3. Some domestic component firms have closed, while appliance-sector employment has risen. The new jobs require technical skills that many displaced workers do not possess.

Text B — Ports and larger markets

1. A new port has reduced delivery times and transport costs. Rivorian firms now have access to larger markets, encouraging increased production and more specialized assembly lines.

2. The government expects trade to promote efficiency but is concerned that interruptions to foreign component supplies could stop appliance production.

Table 1 — Component imports

Imported electronic component costs and delivery times in Rivoria.

Table 2 — Appliance industry

Appliance industry data for Rivoria, 2022–2024.

Lydora’s international digital-services trade

Read the extracts and answer the questions that follow.

Text A — Selling services abroad

1. Lydoran firms export accounting, translation and software-support services. Digital delivery gives firms access to millions of overseas customers at relatively low transport cost.

2. Larger firms have introduced specialist teams and cloud technology. This has raised labour productivity and reduced average costs, although smaller firms struggle to recruit skilled workers.

3. Export income has increased demand for programmers and translators. Wages have risen, but workers without digital skills have received fewer benefits.

Text B — Connections with the global economy

1. Digital-service exports provide foreign currencies used to pay for imported computers and communications equipment. International trade has also increased competition and encouraged faster innovation.

2. Lydora is vulnerable to overseas recessions and internet disruptions. The government wants to diversify export destinations and improve human capital through education and training.

Table 1 — Digital-service exports

Digital-service exports from Lydora

Table 2 — Productivity and employment

Productivity and employment in Lydora’s digital-services sector

Montara’s international grain trade

Read the extracts and answer the questions that follow.

Text A — Lower-cost grain imports

1. Montara has opened its wheat market to international trade. Imported wheat is available below the former domestic price, benefiting bakeries and households. Bread prices have fallen and consumption has increased.

2. Domestic wheat production has declined. Some land has shifted to grapes and vegetables, while displaced agricultural workers have experienced structural unemployment.

3. Food manufacturers use imported wheat to produce pasta and biscuits for export. This allows Montara to acquire raw materials and create products with greater value added.

Text B — Efficiency and resilience

1. Competition from imports has encouraged farms to adopt water-saving technologies. Resources are moving away from relatively high-cost wheat production, which may improve allocative efficiency.

2. A drought in a major foreign supplier recently raised world wheat prices. The government is considering maintaining emergency grain reserves without restoring permanent trade barriers.

Table 1 — Wheat and bread

Montara’s wheat price and bread consumption before and after opening to trade.

Table 2 — Food manufacturing

Food manufacturing in Montara, 2021 and 2024

Selucia’s imports of electric buses

Read the extracts and answer the questions that follow.

Text A — Modernizing public transport

1. Selucia imports electric buses because no domestic firm can currently produce them at a competitive price. The buses have reduced fuel use and improved the reliability of urban transport.

2. Bus operators face lower running costs and have expanded services. International trade has therefore allowed Selucia to acquire technology and specialist equipment unavailable domestically.

3. Imported buses compete with domestically assembled diesel buses. Some assembly workers have lost jobs, although maintenance and charging-network employment has increased.

Text B — Wider effects

1. Electric buses produce less urban air pollution, creating a positive externality of consumption when passengers choose public rather than private transport.

2. Better transport may improve worker mobility and business productivity. However, Selucia depends on imported batteries and spare parts, illustrating the risks of economic interdependence.

Table 1 — Bus costs and services

Bus operating costs and passenger journeys in Selucia

Table 2 — Transport outcomes

Transport outcomes in Selucia before and after electric-bus imports.

Arandia’s flower exports

Read the extracts and answer the questions that follow.

Text A — Expanding flower farms

1. Arandia’s climate allows flowers to be grown throughout the year. Improved air-freight connections have enabled flower farms to sell to supermarkets overseas.

2. Exporters have built greenhouses and packing facilities. Access to larger markets has increased production, employment and foreign-currency receipts. Some firms have reduced average costs through specialization and bulk purchasing.

3. More land and water are now used for flowers rather than vegetables consumed domestically. Flower-farm workers receive higher wages, but local food prices have risen.

Text B — Sustainability and market risk

1. Overseas retailers require consistent quality and environmentally responsible production. These requirements have encouraged more efficient irrigation but raised certification costs.

2. Arandia’s reliance on one export industry creates vulnerability to changes in foreign demand and air-freight prices. The government wants the gains from trade to be more equitable across regions and households.

Table 1 — Flower exports

Flower export revenue and employment in Arandia.

Table 2 — Land and water use

Land and water use for flower production in Arandia.

Solar-energy trade in Solaria

Solaria recently permitted solar panels and batteries to be imported freely at the world price. Figure 1 shows Solaria's market for batteries.

Draw on this

Table 1 shows the labour hours required to produce one solar panel or one battery in Solaria and Norland.

Unit labour requirements for solar-energy products.

For the opportunity-cost calculations, assume that labour is the only resource used to produce these goods and that all available labour is fully employed.

Manufacturers in Solaria use imported batteries to produce solar-energy systems. The lower price has increased consumer access to renewable energy, but some domestic battery factories have closed. The government is considering how to preserve the gains from trade while assisting displaced workers.

Robot imports and textile production in Eastaria

Eastaria has removed barriers to imports of industrial robots. Figure 1 shows Eastaria's market for robots.

Draw on this

Table 1 shows the maximum annual outputs of textiles and robots in Eastaria and Westoria.

Maximum annual output under constant opportunity costs

Textile firms in Eastaria use imported robots to automate production. This has increased productivity and helped some firms enter foreign markets. However, domestic robot producers and some lower-skilled textile workers have experienced falling employment.

Tembala’s seafood exports

Read the extracts and answer the questions that follow.

Text A — International seafood markets

1. Tembala exports tuna and prawns to hotels and supermarkets abroad. Overseas demand has raised fishing incomes and provided foreign currency for imports of fuel, refrigeration equipment and medicine.

2. Processing firms have invested in cold-storage facilities. Larger output allows them to spread fixed costs and reduce spoilage, improving productive efficiency.

3. Domestic seafood prices have increased, and poorer households consume less fish. Some coastal regions have gained considerably more than inland regions.

Text B — Managing natural resources

1. Fishing output has expanded rapidly. If fish are harvested faster than stocks regenerate, current export growth may not be sustainable.

2. A fall in demand from Tembala’s main trading partner recently reduced seafood prices and employment. The government is considering export-market diversification and scientifically determined fishing limits.

Table 1 — Seafood exports

Table 1 — Seafood exports in Tembala

Table 2 — Processing and fish stocks

Processing spoilage and fish-stock index in Tembala, 2020 and 2024.

Calidora’s clothing and fabric trade

Read the extracts and answer the questions that follow.

Text A — Imported fabric and clothing exports

1. Calidoran clothing firms import specialized fabric and computerized sewing machines. These inputs are either unavailable domestically or cheaper abroad. Firms have improved quality and increased exports of sportswear.

2. Foreign competition has forced less efficient clothing firms to reduce costs. Larger exporters have invested in automated production and obtained economies of scale, while some small workshops have closed.

3. Export growth has created formal employment, particularly for women. However, wages remain low in some factories and the gains have been concentrated in two industrial cities.

Text B — Trade, efficiency and dependence

1. Sportswear exports generate foreign currency used to finance imported machinery, energy and medicine. Access to many overseas markets reduces dependence on domestic demand.

2. Calidora’s clothing industry depends heavily on imported fabric. Shipping disruptions can halt production, while changes in foreign fashion preferences can reduce orders. The government wants trade to produce more efficient resource allocation and broader improvements in living standards.

Table 1 — Clothing trade

Calidora’s clothing trade, 2021 and 2024.

Table 2 — Costs and employment

Costs and formal employment in Calidora’s sportswear industry

Coffee, machinery and trade in Lumena

Lumena and Terranova can produce coffee or agricultural machinery using the same quantity of resources. Table 1 shows their maximum annual outputs, assuming constant opportunity costs.

Maximum annual output when all resources are devoted to one product; opportunity costs are constant.

Lumena currently exports coffee. Figure 1 shows Lumena's domestic coffee market after it opened the market to free trade. Lumena is a small economy and therefore cannot influence the world price.

Draw on this

Access to foreign markets has encouraged Lumena's coffee-processing firms to invest in larger factories. However, workers formerly employed by domestic machinery producers have experienced structural unemployment, while intensive coffee cultivation is contributing to soil degradation.

Trade in medical devices and digital services

Coastland and Highland use similar quantities of resources to produce medical devices or units of digital services. Table 1 shows their maximum outputs when all resources are employed.

Table 1: Maximum annual output when all resources are allocated to one product.

Highland has opened its digital-services market to international trade. Figure 1 shows its annual domestic market for digital services. Foreign demand has encouraged firms to employ specialist workers and invest in cloud-computing capacity.

Draw on this

Highland's government wants to develop a lasting comparative advantage in digital services. However, some policy-makers are concerned that rapid technological change could make excessive specialization risky.

Cocoa exports and economic vulnerability in Agraria

Agraria has become heavily dependent on cocoa exports. Figure 1 shows its domestic cocoa market under free trade.

Draw on this

Table 1 compares the maximum annual output of cocoa and cassava in Agraria and Belvar. Both countries have linear production possibilities curves.

Maximum annual output under constant opportunity costs.

Cocoa exports provide foreign exchange and rural employment. However, world cocoa prices fluctuate significantly, and cocoa farming is contributing to deforestation. Agraria's transport infrastructure and food-processing skills remain underdeveloped.

Tourism and grain trade between Islandia and Mainland

Islandia and Mainland can produce tourism-service units or grain. Table 1 shows their maximum annual outputs under constant opportunity costs.

Maximum annual output under constant opportunity costs

Figure 1 shows Islandia's market for tourism services after it gained unrestricted access to the world market.

Draw on this

Tourism provides Islandia with foreign exchange and access to a much larger market. However, the economy is increasingly dependent on tourism, while air travel and resort construction create environmental costs. Storm damage can also cause sudden falls in visitor numbers.