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S5 Economics: International Trade Practice Paper 1
S5 Economics: International Trade Practice Paper 1
Ten items on opportunity cost, comparative advantage, tariffs, exchange rates and the terms of trade, each with an answer and a one-line note.
Quick answer One machine costs country A 2 tonnes of rice and country B 4 tonnes, so A specialises in machines. A 200 dollar good plus a 15 per cent tariff is 230 dollars, and a 20 per cent tariff on 1,000 units raises 40,000 dollars.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 questions |
| Suggested time | 25 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S5 Economics: International Trade – Tutor Lesson Plan |
| Level | S5 |
02 Questions (10 items)
- FoundationCountry A needs 10 hours to make one machine and 5 hours to grow one tonne of rice. What is the opportunity cost of one machine in country A?
- FoundationCountry B needs 12 hours for one machine and 3 hours for one tonne of rice. What is its opportunity cost of one machine?
- FoundationWhat is the tariff rate on most imported goods in Hong Kong?
- FoundationAn imported good sells for 200 dollars locally and a 15 per cent tariff is imposed. What is the price after the tariff?
- IntermediateOne machine costs country A 2 tonnes of rice and country B 4 tonnes. How should the two countries specialise?
- IntermediateThe exchange rate is 7.8 Hong Kong dollars per US dollar. What is the Hong Kong dollar price of a 50 dollar American good?
- IntermediateThe Hong Kong dollar weakens from 7.8 to 7.9 per US dollar. How much more does the same 50 dollar good cost in Hong Kong dollars?
- ChallengeA thousand units are imported at a local price of 200 dollars each and a 20 per cent tariff is charged. What is the government tariff revenue?
- ChallengeThe export price index is 120 and the import price index is 150. What is the terms of trade index?
- Error redoA student argues that the country with an absolute advantage should produce that good. What is the correct principle of specialisation?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | 2 tonnes of rice | The opportunity cost is 10 divided by 5, which is 2 tonnes of rice. |
| 2 | 4 tonnes of rice | The opportunity cost is 12 divided by 3, which is 4 tonnes of rice. |
| 3 | Zero | Hong Kong is a free port, so most goods enter duty free and only a few items such as tobacco and alcohol are taxed. |
| 4 | $230 | The price becomes 200 multiplied by 1.15, which is 230 dollars. |
| 5 | Country A should specialise in machines and country B in rice | Country A has the lower opportunity cost of machines and therefore the comparative advantage. |
| 6 | HK$390 | The price is 50 multiplied by 7.8, which is 390 Hong Kong dollars. |
| 7 | HK$5 more | The new price is 395 Hong Kong dollars, which is 5 dollars above the old 390 dollars. |
| 8 | $40,000 | The tariff is 40 dollars per unit, and 40 times 1,000 is 40,000 dollars. |
| 9 | 80 | The index is 120 divided by 150 and multiplied by 100, so the terms of trade worsened by 20 per cent. |
| 10 | Specialise according to comparative advantage, that is, in the good with the lower opportunity cost | Absolute advantage compares productivity, while comparative advantage compares opportunity cost. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
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