Pearson Edexcel International GCSE Economics: Trading blocs, WTO, trade patterns (4EC1) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover statements 2.2.2 d), e) and f) of the Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3: trading blocs, the WTO and trade patterns. The specification has a single tier of entry and says learners may use a calculator, with workings given. All countries and figures are invented. Revise first with the study guide and the revision notes. See also the course hub and the printable checklist.

Questions

1. What is meant by a trading bloc? [2]

2. A group of countries removes tariffs on each other’s goods and applies one common tariff to goods from the rest of the world, with no free movement of labour or capital. Which type of bloc is this? [1]

3. Country F puts a 25% tariff on imported cloth. Partner G sells cloth at 40 a metre and outsider H at 36 a metre. G and F then form a trading bloc with no tariff between them.

(a) Calculate the price in F of cloth from G and from H before the bloc. [2] (b) State which country F buys from before the bloc. [1] (c) Calculate the percentage fall in the price of cloth in F after the bloc. [2] (d) State whether this is trade creation or trade diversion. [1]

4. Explain two ways in which joining a trading bloc may benefit firms in a member country. [4]

5. Country P makes ceramic mugs at 50 each. Partner Q sells them at 40 each. P has a 40% tariff on all imports and buys 8,000 mugs a year.

(a) Calculate Q’s price in P before the bloc. [1] (b) Explain why P buys from home producers before the bloc. [1] (c) Calculate the saving to buyers after P and Q form a bloc and P buys 8,000 mugs from Q. [2] (d) State whether this is trade creation or diversion, with a reason. [1]

6. Explain how a trading bloc may harm a country that is not a member. [3]

7. Describe two actions that the World Trade Organization (WTO) takes. [4]

8. Country N exported goods worth 250 million a year to Country M. After M added a new barrier, exports fell to 210 million. N complained to the WTO.

(a) Calculate the percentage fall in N’s exports. [3] (b) Explain how the WTO may help N. [3]

9. Analyse why a small developing country may find it hard to use the WTO’s dispute system. [6]

10. The table shows invented trade data for two countries, in millions.

	Country K	Country L
Total exports	900	300
of which manufactures	720	45
Total imports	780	340

(a) Calculate manufactures as a percentage of exports for each country. [2] (b) Calculate the trade balance of each country. [2] (c) Suggest which country is more likely to be developed, using two pieces of evidence. [3]

11. Country J earns 400 million a year from exports. Copper makes up 70% of this. The world price of copper falls by 15%. Price elasticity of demand for copper is −0.4.

(a) Calculate the new value of copper exports and the fall as a percentage of total exports. [4] (b) Income in importing countries rises by 4%. Income elasticity of demand is 0.4 for copper and 1.8 for machinery. Calculate the change in demand for each. [2] (c) Explain one problem for Country J of relying on copper. [3]

12. Country R is a small developing country that sells mainly farm goods. A large neighbouring bloc has invited R to join. Evaluate whether R should join. [10]

Answers

1. A group of countries [1] that agree to reduce or remove trade barriers between themselves [1]. [2] Examiner insight: “What is meant by” asks for two separate parts, so naming the group alone gives only half of the definition.

2. Customs union [1]. [1] Examiner insight: The common external tariff is the feature that separates this from a free-trade area, so look for it in the stem.

3. (a) G: 40 × 1.25 = 50 [1]. H: 36 × 1.25 = 45 [1]. (b) H, the cheaper source [1]. (c) New price = 40, down from 45 [1]. (45 − 40) ÷ 45 = 5 ÷ 45 = 11.1% fall [1]. (d) Trade diversion, because F switches from lower-cost outsider H to higher-cost partner G [1]. [6] Examiner insight: Compare prices with tariff, not the raw prices. Using 36 and 40 would pick the right source for the wrong reason, and the percentage in part (c) uses the tariff-inclusive price.

4. First benefit: a bigger market without tariff barriers [1], so output can rise and average cost falls through economies of scale [1]. Second benefit: cheaper inputs from partners [1], so costs fall and prices or profit margins improve [1]. (Other valid points: more investment, more competition.) [4] Examiner insight: Each benefit needs a reason that links the bloc to the firm. A bare list such as “bigger market, cheaper inputs” shows knowledge but little explanation.

5. (a) 40 × 1.40 = 56 [1]. (b) 56 is above the home price of 50, so home mugs are cheaper [1]. (c) Saving per mug = 50 − 40 = 10 [1]. 10 × 8,000 = 80,000 [1]. (d) Trade creation, because a higher-cost home producer is replaced by a lower-cost partner [1]. [5] Examiner insight: A reason attached to the label makes the answer complete. State what replaced what.

6. The non-member’s goods still face the external tariff [1], while partners’ goods do not, so the non-member’s goods become dearer inside the bloc [1]. Its sales and export earnings fall, which may cost jobs in its exporting firms [1]. [3] Examiner insight: Start from the tariff difference and follow it to sales and jobs. Writing “non-members lose out” without the link earns little.

7. First action: it provides a forum where members negotiate lower trade barriers [1], and the agreements become rules for members [1]. Second action: it settles disputes between members, with a panel ruling on complaints [1], and it may authorise retaliation if a loser does not comply [1]. (Other valid actions: monitoring policies, supporting developing countries.) [4] Examiner insight: “Describe” asks for an action plus a brief development, so give the detail of what the WTO does.

8. (a) Fall = 250 − 210 = 40 million [1]. 40 ÷ 250 [1] = 16% [1]. (b) N can bring a complaint, and a panel can rule on whether M has broken the rules [1]. If M is found to have broken them, M is asked to remove the barrier [1]. If M refuses, N may be authorised to impose restrictions of similar value on M’s goods, giving M a reason to comply [1]. [6] Examiner insight: Use the countries named in the question. Applying the WTO’s process to N and M shows context, which an answer about the WTO in general does not.

9. A small country may lack the lawyers and money to prepare a case [1], so it may not bring complaints even when its exporters are hurt [1]. Even if it wins, its retaliation against a large economy may hurt its own consumers more than the large country [1], because it buys important goods from the large country and its trade is small to the large country [1]. Cases can take a long time, and a country with few export products cannot easily wait for earnings to recover [1], so the system may favour richer members [1]. [6] Examiner insight: “Analyse” rewards a chain from cause to consequence. Three linked points developed in this way gain more credit than six short assertions.

10. (a) K: 720 ÷ 900 × 100 = 80% [1]. L: 45 ÷ 300 × 100 = 15% [1]. (b) K: 900 − 780 = +120 million surplus [1]. L: 300 − 340 = −40 million deficit [1]. (c) K is more likely developed [1]. Evidence one: manufactures make up 80% of its exports against 15% for L [1]. Evidence two: the other 85% of L’s exports (255 million) are probably mainly primary products, which is typical of a developing country [1]. (A trade surplus alone is not evidence of development.) [7] Examiner insight: “Suggest” invites a reasoned judgement, so use figures you calculated. Evidence from the data is stronger than general claims about developed countries.

11. (a) Copper exports = 0.70 × 400 = 280 million [1]. Quantity rises by 0.4 × 15 = 6%, so revenue = 0.85 × 1.06 = 0.901 [1]. New value = 280 × 0.901 = 252.3 million, a fall of 27.7 million [1]. 27.7 ÷ 400 = 6.9% of total exports [1]. (b) Copper: 0.4 × 4 = 1.6% [1]. Machinery: 1.8 × 4 = 7.2% [1]. (c) Copper earnings depend on the world price [1]. A price fall cuts earnings because demand is inelastic, so quantity does not rise enough to make up [1]. This reduces income for the country and makes planning spending or imports harder [1]. [9] Examiner insight: In calculations, show the quantity change before the revenue change. Skipping straight to a revenue figure makes mistakes hard to credit.

12. Case for joining: tariff-free access to a larger market lets farm exporters sell more and may lower average costs [1]. Cheaper imported machinery and inputs can raise productivity [1]. Foreign firms may invest inside the bloc, creating jobs [1]. Case against: R’s weak firms may be undercut by partner goods, causing job losses [1]. If partners are higher-cost than outsiders, trade diversion raises the cost of imports [1]. R may lose tariff revenue and independence in trade policy [1]. Development: the gain depends on whether the bloc’s tariffs on farm goods are low and how well R can adjust [2]. Judgement: R should join if the bloc is its main buyer and if it has help for workers who lose jobs [1]. Otherwise it could seek wider agreements [1]. [10] Examiner insight: An evaluation must reach a decision that follows from the points. Naming the condition on which the decision depends makes the judgement supported.

Where marks are usually lost

• Leaving out the common external tariff when defining a customs union.
• Comparing raw prices instead of prices including tariff.
• Mixing up trade creation and trade diversion.
• Writing about non-members without mentioning the external tariff.
• Giving WTO actions without developing them.
• Describing the WTO as a bloc or as a body that forces members to obey.
• Writing general claims about developing countries when the question gives data.
• Leaving out workings in calculations.
• Ending an evaluation without a decision.

Next steps

• Re-read the revision notes and the study guide.
• Go to the course hub or the printable checklist.
• Try the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

Pearson Edexcel International GCSE in Economics (4EC1), specification Issue 3, first teaching September 2017, published by Pearson Education Limited. Statements 2.2.2 d), e) and f).