Economics · Oct / Nov 2020 · Paper 21 · Question 4

0455

As printed in the paper

The question as text

South east Asian countries have reduced tariffs between themselves through the ASEAN Free Trade Agreement. ASEAN member countries are also removing non-tariff methods of protection. The intention is to raise economic growth through more international trade. This should enable small and medium-sized firms in ASEAN countries to grow and increase their exports.

Read automatically from the paper; the printed page above is exact.

Show the answer and mark scheme

4(a)[2]
Define tariffs. Tariffs are a tax (1)
on imports/exports (1)
which increase the price of imported/exported goods (1).
4(b)[4]
Explain two non-tariff methods of protection. Logical explanation which might include: Quotas (1)
quantitative restriction on the amount of imports that can enter a country (1). Subsidies (1)
grants given to domestic firms to reduce domestic cost of production and reduce demand for imported goods (1). Embargoes (1)
total restriction on a certain product from a certain country (1). 4 Also accept other non-tariff barriers such as rules and regulations, exchange controls, etc. One mark for each of two reasons identified and one mark for each of two explanations.
4(c)[6]
Analyse, using a production possibility curve (PPC) diagram, the beneficial effects for a country of the growth of its small and medium-sized firms. Up to 4 marks for the diagram: Axes correctly labelled (1). Initial curve drawn as a curve or downward sloping line to the axes (1). New curve drawn as a curve or downward sloping line to the axes (1). Shift to the right indicated by arrow or lettering (1). Up to 2 marks for coherent analysis which might include: The growth of its small and medium-sized firms will lead to an increase in the number of firms in the economy (1)
this will increase productive potential / increase productive capacity / cause economic growth (1). Also accept a tilt outward of the new PPC curve.
4(d)[8]
Discuss whether or not increased international trade can promote economic growth. In assessing each answer, use the table opposite. Why it may:
increase size of the market for domestically produced goods, increase exports, increase total demand
firms can specialise and achieve economies of scale, decrease cost of production, increase demand for goods and services produced domestically
increase competitive pressure (1)
making firms more efficient (1)
increase access to products not available domestically, e.g. raw materials to produce other goods, increase output of an economy (1). Why it may not:
Increase amount of imports, decrease total demand of the economy
domestic firms may not be able to compete causing less revenue, less profits, more unemployment,
may result in shortages of e.g. rice in the domestic market
make the economy more subject to sudden changes in demand and supply. Level Descriptors Mark A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development or may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content. Guidance Example of L2 answer: Increased international trade may not benefit a country because the country may be in a trade deficit as the cost of a country’s imports exceed the total value of its exports. Consumers may purchase more goods and services from abroad than from domestic firms which may reduce economic growth as they make less profit. The value of the currency may fall eventually because more goods and services are being imported instead of exported. Principal Examiner comment: Limited on one side.

Practise this paper →

Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.