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IB Economics HL 4.1.3 Limits of comparative advantage Question Bank

Practise IB Economics HL 4.1.3 by applying limits of comparative advantage concepts to exam-style questions.

Syllabus
First assessment 2022
Course
Economics HL
Level
HL

Exam points

  • identify the relevant model, concept or evidence
  • apply the correct subject framework to the question
  • evaluate the result using clear evidence and subject terminology

4.1.3 (HL)—Limits of comparative advantage question 1

[Maximum number: 2]

Country X and Country Y are capable of producing both apples and bananas. Assume a two-country, two-product model.

Country Y has absolute advantage in the production of both apples and bananas, and comparative advantage in the production of bananas.

Outline one reason why it might not be in a country's best interests to specialize according to the principle of comparative advantage.

The market for oranges in Country Z is illustrated on Figure 5.

Figure 5

Figure 5

The domestic demand and supply for oranges are given by the functions

Qd=300−100PQs=−60+60P\begin{aligned} & Q d=300-100 P \\ & Q s=-60+60 P \end{aligned}

where P is the price of oranges in dollars per kilogram ( $\$ per kg ), Q d is the quantity of oranges demanded (thousands of kg per month) and Qs is the quantity of oranges supplied (thousands of kg per month). The world price of oranges is $2\$ 2 per kg.

Due to increased awareness of the possible health benefits of vitamin C , the demand for oranges in Country Z increases by 60000 per month at each price.

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