AP AP Trade, Resources & Economic Geography 1 — Questions and Answers
Question 1: Comparative advantage in international trade means a country should:
- Produce only goods it can make cheaper than any other country
- Specialize in goods it produces at a relatively lower opportunity cost (Correct answer)
- Import all goods to avoid domestic production costs
- Trade only with neighboring countries
Correct answer: Specialize in goods it produces at a relatively lower opportunity cost
Comparative advantage holds that countries benefit from specializing in goods they produce at the lowest opportunity cost relative to other goods, even if another country is absolutely better at producing everything.
Question 2: A free trade zone (FTZ) is an area where:
- All goods are manufactured locally without imports
- Goods can be imported, stored, or processed with reduced tariffs (Correct answer)
- Only agricultural products are traded
- Foreign corporations are banned from operating
Correct answer: Goods can be imported, stored, or processed with reduced tariffs
FTZs are designated areas where goods can be handled with minimal customs duties, encouraging trade and foreign investment.
Question 3: Which sector of the economy involves extracting raw materials directly from the earth?
- Primary sector (Correct answer)
- Secondary sector
- Tertiary sector
- Quaternary sector
Correct answer: Primary sector
The primary sector encompasses activities like mining, farming, fishing, and forestry that extract or harvest natural resources.
Question 4: The 'resource curse' refers to the phenomenon where:
- Countries with many resources develop fastest
- Resource-rich countries often experience slower economic growth and poor governance (Correct answer)
- Natural resources always deplete faster than expected
- Environmental protection prevents resource extraction
Correct answer: Resource-rich countries often experience slower economic growth and poor governance
The resource curse describes how countries with abundant natural resources often suffer from economic mismanagement, corruption, and conflict rather than sustained development.
Question 5: Export Processing Zones (EPZs) are primarily used by developing countries to:
- Restrict imports of manufactured goods
- Attract foreign manufacturing investment by offering tax breaks and relaxed regulations (Correct answer)
- Protect domestic industries from foreign competition
- Export agricultural surpluses to wealthy nations
Correct answer: Attract foreign manufacturing investment by offering tax breaks and relaxed regulations
EPZs offer incentives like tax holidays and looser labor regulations to attract foreign factories, aiming to generate employment and foreign exchange.
Question 6: Which of the following best describes a 'commodity chain'?
- A chain of stores selling the same product globally
- The series of links connecting production, distribution, and consumption of a good (Correct answer)
- A cartel that controls global commodity prices
- Infrastructure connecting mining regions to ports
Correct answer: The series of links connecting production, distribution, and consumption of a good
A commodity chain (or global value chain) traces all the steps — from raw material extraction to final sale — that go into producing and delivering a product.
AP AP Trade, Resources & Economic Geography 1
Comparative advantage in international trade means a country should: