Economics Questions and Answers

The principle of comparative cost states that; 
international trade takes place between two countries when the ratios of comparative cost of producing goods differ, and each country would specialise in producing that commodity in which it has a comparative advantage.

Comparative cost advantage is when a country produces a good or service for a lower opportunity cost than other countries.

Tariffs are duties (taxes) imposed on imports. When tariffs are imposed, the prices of imports would increase to the extent of tariff. The increased prices will reduced the demand for imported goods and at the same time induce domestic producers to produce more of import substitutes. Non-essential imports can be drastically reduced by imposing a very high rate of tariff. Therefor, reducing tariffs will further increase balance of payment deficits.

A rise in imports has a negative effect on the balance of trade, that is, it will tend to increase the trade deficit or reduce the trade surplus.

No explanation has been provided for this answer.

Activities that lead to  economic growth

• Natural Resources. The discovery of more natural resources like oil, or mineral deposits may boost economic growth as this shifts or increases the country's Production Possibility Curve. 
• Physical Capital or Infrastructure. 
• Population or Labor. 
• Human Capital. 
• Technology. 
• Law