Economic Geography Quiz: 20 Questions on Trade and Development

Correct answer: Industry, because it manufactures a new product.

The factory manufactures food, so its main activity belongs to industry. Growing the wheat is agriculture; retailing the finished pasta is a service. Classify the activity being performed, not just the origin of its materials.

Correct answer: $192 billion.

GNI is GDP plus primary income received from abroad minus primary income paid abroad: 200 + 12 − 20 = $192 billion. GDP measures domestic production during the year; neither figure is the stock of accumulated wealth.

Correct answer: A has more total output; B has higher GDP per person.

A’s GDP per capita is $20,000, while B’s is $30,000. A nevertheless has twice the total GDP. Per capita is an average of output, not a median wage or proof that everyone enjoys the same living standard.

Correct answer: Use GDP per capita converted at purchasing power parities.

Purchasing power parity, or PPP, conversion accounts for differences in price levels across economies. Market exchange rates answer different questions, such as the currency value of financial flows. PPP-adjusted GDP per capita still does not measure how output is distributed or every aspect of wellbeing.

Correct answer: HDI combines health and education with an income measure.

UNDP’s HDI combines life expectancy, schooling and GNI per capita. Equal income therefore need not produce the same HDI. The standard HDI summarizes average achievements; it does not itself capture inequality within a population.

Correct answer: Site B, by $1 million per year.

The stated totals are $7 million at A and $6 million at B. B’s higher labor bill is more than offset by lower freight costs. This simplified comparison illustrates why the lowest wage bill alone does not identify the lowest-cost location.

Correct answer: Learning through local knowledge spillovers.

The key mechanism is learning: useful know-how spreads between nearby firms. Shared infrastructure and better employer–worker matching are other clustering benefits, but they are not the process described. High rents and congestion can still offset some advantages of concentration.

Correct answer: $30 per device.

Gross value added is the value of output minus intermediate inputs: $100 − $70 = $30. The $100 gross export includes foreign input value. The remaining $30 is not profit alone: it also covers labor and other components of value added.

Correct answer: Offshoring without outsourcing.

The work crosses a national boundary, so it is offshored. It remains within the same corporate group, rather than being contracted to an independent supplier, so it is not outsourced under the distinction stated here. The two decisions concern different boundaries.

Correct answer: Lower time-related costs can reduce the producer’s economic distance.

Market connections depend on time, reliability and transport prices, not distance alone. Faster, more dependable delivery can reduce economic distance even when the road’s length is unchanged. Whether the producer gains new customers still depends on demand and other business conditions.

Correct answer: Treating each place’s position as permanent and internally uniform.

Core–periphery models simplify uneven economic relationships. They are starting points for testing mechanisms, not permanent rankings of whole societies. The chosen scale matters, regions contain internal differences, and evidence may support other explanations or changing relationships.

Correct answer: The job may be informal even though the product itself is legal.

Informality concerns how work and enterprises are covered by formal arrangements, in law and in practice. It is not a synonym for producing illegal goods. Informal workers still contribute economic activity, and informal jobs can exist in different kinds of enterprises.

Correct answer: Both average $30,000 per person, but A has the wider regional gap.

Equal regional populations make each national figure the simple mean: $30,000 in both cases. A’s regional gap is $40,000, compared with B’s $10,000. The same national average can hide different spatial patterns; these figures still say nothing about inequality within each region.

Correct answer: Export receipts fall, potentially straining revenues linked to that mineral.

Export receipts equal price multiplied by quantity, so a lower price at unchanged volume reduces receipts. Heavy concentration increases exposure to that market’s shocks. Effects on public finances depend on how taxes, royalties or state enterprises connect government revenue to the sector.

Correct answer: Earlier investment and institutions can shape later development paths.

Past investments can leave infrastructure, skills and relationships that influence later choices. This is a form of path dependence. History and institutions help explain the pattern, but they do not make regional fortunes permanent or remove the role of present-day policy and investment.

Correct answer: It rises by 50%.

Output becomes 1.2 times its starting level while worker numbers become 0.8 times their starting level. Output per worker therefore rises by 1.2 ÷ 0.8 = 1.5, or 50%. Falling factory employment does not by itself mean falling manufacturing output.

Correct answer: Digital exports still depend on local connectivity and usable infrastructure.

Digital delivery reduces some barriers of physical distance, but firms and workers still need reliable, affordable connections and usable technology. Skills, market demand and institutions also matter. Selling services online changes the role of geography rather than making location irrelevant.

Correct answer: A, because each machine costs it less grain forgone.

A gives up 6 ÷ 12 = 0.5 ton of grain per machine; B gives up 8 ÷ 8 = 1 ton. A therefore has the lower opportunity cost in machines. Comparative advantage depends on this tradeoff, not merely on which region can produce more.

Correct answer: A negative externality: a cost imposed on others outside the transaction.

The uncompensated damage is a negative externality. Some costs fall on people outside the factory’s transactions, so its private costs understate the wider social costs. Economic geography asks where these burdens occur as well as where production and benefits are concentrated.

Correct answer: An association, with causation and other influences still needing investigation.

The pattern shows an association in the observed regions, not a proven causal effect. Schooling may affect income, income may affect schooling, and other factors may influence both. A cross-sectional scatterplot alone cannot separate these explanations.