International Trade: Theories, Barriers, and Impact on Businesses

Question 1

What is the primary reason countries engage in international trade?

Accepted Answer

To acquire resources and access markets not available domestically

Answer

To increase their GDP

Answer

To improve their living standards

Answer

To strengthen political alliances

Question 2

According to David Ricardo's theory of comparative advantage, which goods should countries specialize in exporting?

Accepted Answer

Goods they can produce more efficiently compared to other countries

Answer

Goods they can produce more efficiently in absolute terms than other countries

Answer

Goods they can import more cheaply than other countries

Answer

Goods they can import more efficiently than other countries

Question 3

Which of the following is NOT a potential benefit of international trade?

Accepted Answer

Higher domestic producer prices

Answer

Increased consumer choice

Answer

Job creation in export industries

Answer

Economic growth

Question 4

Which of the following is NOT a measure commonly used as a trade barrier?

Accepted Answer

Subsidies

Answer

Tariffs

Answer

Quotas

Answer

Embargoes

Question 5

Which of the following is a potential drawback of international trade?

Accepted Answer

Environmental degradation.

Answer

Increased consumer choice.

Answer

Lower prices for goods and services.

Answer

Increased economic growth.

Question 6

Brexit refers to the UK's:

Accepted Answer

Withdrawal from the EU.

Answer

Accession to the EU.

Answer

Renegotiation of its membership in the EU.

Answer

Adoption of the Euro currency.

Question 7

A trade deficit occurs when:

Accepted Answer

Imports exceed exports

Answer

Exports exceed imports

Answer

Imports and exports are equal

Answer

Foreign exchange reserves are high

Question 8

The balance of trade is the difference between:

Accepted Answer

Exports and imports

Answer

Imports and exports

Answer

Government revenue and expenditure

Answer

Savings and investment

Question 9

What is NOT a determinant of absolute advantage?

Accepted Answer

Government support

Answer

Productivity of labor and capital

Answer

Technology

Answer

Natural resources

Question 10

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing goods in which they have a lower opportunity cost

Answer

Produce all goods domestically

Answer

Export only raw materials

Answer

Import all manufactured goods

Question 11

What is the main purpose of creating a free trade area?

Accepted Answer

Eliminate tariffs and trade barriers within member countries.

Answer

Establish a common currency for member countries.

Answer

Unify member countries into a single political entity.

Answer

Standardize all laws and regulations across member countries.

Question 12

What is the primary role of the World Trade Organization (WTO) in international trade?

Accepted Answer

The WTO negotiates and enforces trade agreements between member countries.

Answer

The WTO sets tariffs and quotas for global trade.

Answer

The WTO regulates international currency exchange rates.

Question 13

According to the theory of comparative advantage, countries should:

Accepted Answer

Focus on producing goods they can produce most efficiently and trade with other countries for goods they cannot produce efficiently

Answer

Aim to produce all goods domestically, regardless of their efficiency in producing them

Answer

Only import goods that they cannot produce domestically

Answer

Export all goods that they produce domestically

Question 14

Which of the following defines absolute advantage in international trade?

Accepted Answer

A country can produce more goods or services with the same resources compared to other countries.

Answer

A country can produce goods or services with fewer inputs compared to other countries.

Answer

A country can produce higher quality goods or services compared to other countries.

Answer

A country can export more goods or services compared to other countries.

Question 15

According to the principle of comparative advantage, countries should:

Accepted Answer

Specialize in producing goods or services where they have a comparative advantage, even if they do not have an absolute advantage.

Answer

Only produce goods or services where they have an absolute advantage.

Answer

Protect domestic industries from foreign competition, regardless of comparative advantage.

Answer

Impose tariffs on imports to encourage domestic production, regardless of comparative advantage.

Question 16

A tariff is a tax levied on:

Accepted Answer

Imported goods.

Answer

Exported goods.

Answer

Domestically produced goods.

Answer

Services.

Question 17

The World Trade Organization (WTO) primarily:

Accepted Answer

Promotes free trade and reduces trade barriers.

Answer

Imposes tariffs on imported goods.

Answer

Subsidizes domestic industries.

Answer

Negotiates trade agreements between countries.

Question 18

A balance of payments deficit occurs when:

Accepted Answer

Imports exceed exports.

Answer

Exports exceed imports.

Answer

Currency value appreciates against other currencies.

Answer

Foreign exchange reserves increase.

Question 19

The United Kingdom's decision to leave the European Union is an example of:

Accepted Answer

Increased support for protectionism.

Answer

Increased support for free trade.

Answer

Increased globalisation.

Answer

Increased regionalisation.

Question 20

Which of the following is NOT a theory of international trade?

Accepted Answer

Laissez-faire

Answer

Absolute advantage

Answer

Comparative advantage

Answer

Mercantilism

Question 21

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing goods where they have a comparative advantage.

Answer

Specialize in producing goods where they have an absolute advantage.

Answer

Produce all goods domestically.

Answer

Import all goods from other countries.

Question 22

Which of the following is NOT a trade barrier?

Accepted Answer

Free trade agreements

Answer

Tariffs

Answer

Quotas

Answer

Embargoes

Question 23

The impact of tariffs on consumer prices is to:

Accepted Answer

Increase consumer prices.

Answer

Decrease consumer prices.

Answer

Have no impact on consumer prices.

Answer

Increase consumer surplus.

Question 24

Which of the following is NOT a benefit of free trade?

Accepted Answer

Guaranteed domestic employment

Answer

Increased consumer choice

Answer

Lower prices for consumers

Answer

Greater economic growth

Question 25

According to the theory of comparative advantage, countries should specialize in producing and exporting:

Accepted Answer

Goods and services for which they have a comparative advantage.

Answer

Goods and services for which they have an absolute advantage.

Answer

Goods and services that they can produce at the lowest cost.

Answer

Goods and services that they can produce with the highest quality.

Question 26

How does a tariff affect the price of imported goods?

Accepted Answer

Increases the price

Answer

Decreases the price

Answer

Has no impact on the price

Answer

Depends on the elasticity of demand for the imported goods

Question 27

A situation where a country imports more goods and services than it exports is called a:

Accepted Answer

Trade deficit

Answer

Trade surplus

Answer

Balance of payments

Answer

Current account deficit

Question 28

What is a potential consequence of a trade surplus for a country?

Accepted Answer

Appreciation of the domestic currency

Answer

Depreciation of the domestic currency

Answer

Inflation

Answer

Deflation

Question 29

What is the primary purpose of a tariff?

Accepted Answer

To protect domestic industries from foreign competition

Answer

To generate revenue for the government

Answer

To increase consumer spending

Answer

To promote free trade

Question 30

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing the goods in which they have a comparative advantage.

Answer

Specialize in producing the goods in which they have an absolute advantage.

Answer

Produce all goods domestically, regardless of cost.

Answer

Import all goods from other countries.

Question 31

Which of the following is NOT a factor that can lead to economies of scale in international trade?

Accepted Answer

Government subsidies

Answer

Specialization

Answer

Increased production

Answer

Reduced transportation costs

Question 32

What is the difference between a trade deficit and a trade surplus?

Accepted Answer

A trade surplus occurs when exports exceed imports, while a trade deficit occurs when imports exceed exports.

Answer

A trade deficit occurs when exports exceed imports, while a trade surplus occurs when imports exceed exports.

Answer

There is no difference between a trade deficit and a trade surplus.

Answer

A trade deficit is always harmful to a country, while a trade surplus is always beneficial.

Question 33

According to the theory of comparative advantage, a country should specialize in producing and exporting goods for which it has:

Accepted Answer

a comparative advantage

Answer

an absolute advantage

Answer

a higher absolute advantage

Answer

a higher comparative advantage

Question 34

The concept of 'infant industry protection' suggests that:

Accepted Answer

Domestic industries should be shielded from foreign competition temporarily

Answer

Free trade is always the best policy for developing countries

Answer

Trade barriers should be abolished for all industries

Answer

Government intervention in trade is never necessary

Question 35

Which of the following is NOT a factor that can contribute to trade imbalances?

Accepted Answer

Cultural preferences

Answer

Differences in factor endowments

Answer

Government trade policies

Answer

Currency exchange rates

Question 36

'Dutch disease' refers to the phenomenon where:

Accepted Answer

A country's reliance on natural resource exports leads to an overvalued currency and a decline in other industries

Answer

A country's trade surplus leads to a rise in inflation

Answer

A country's exchange rate is fixed against a foreign currency

Answer

A country's GDP growth is consistently above the global average

Question 37

What is a potential negative consequence of international trade?

Accepted Answer

Job losses in specific industries

Answer

Reduced innovation and technology sharing

Answer

Limited consumer options and higher prices

Answer

Decreased economic growth and job creation

Question 38

Which of the following is a disadvantage of international trade?

Accepted Answer

Reduced job opportunities in certain domestic industries

Answer

Access to new markets

Answer

Lower prices for consumers

Answer

Increased consumer choice

Question 39

According to the principle of absolute advantage, a country should:

Accepted Answer

Specialize in producing and exporting goods that it can produce more efficiently than other countries.

Answer

Produce all of its own goods and services domestically

Answer

Import goods that it can produce more efficiently than other countries.

Question 40

The impact of a tariff on domestic consumers is most likely to be:

Accepted Answer

Higher prices

Answer

Increased product availability

Answer

Lower import costs

Answer

Improved product quality

Question 41

The theory of comparative advantage implies that countries should:

Accepted Answer

Specialize in producing and exporting goods where they have a lower opportunity cost.

Answer

Import only goods that they cannot produce domestically

Answer

Produce only goods that they can produce more efficiently than other countries.

Question 42

Which of the following is a potential benefit of free trade?

Accepted Answer

Increased economic growth

Answer

Reduced consumer choice

Answer

Job losses in certain domestic industries

Question 43

The primary function of the World Trade Organization (WTO) is to:

Accepted Answer

Promote free trade and resolve trade disputes among member countries

Answer

Provide financial assistance to developing countries

Answer

Negotiate bilateral trade agreements between countries

Answer

Set tariffs and quotas on international trade

Question 44

Which of the following is NOT a type of trade agreement?

Accepted Answer

Unilateral agreement

Answer

Regional trade agreement

Answer

Multilateral agreement

Answer

Bilateral agreement

Question 45

The term 'balance of payments' refers to:

Accepted Answer

A record of a country's international financial transactions over a period of time

Answer

The amount of foreign currency a country holds

Answer

The difference between a country's exports and imports

Question 46

According to the theory of absolute advantage, countries should specialize in producing and exporting goods where they:

Accepted Answer

Have the lowest opportunity cost of production

Answer

Receive government subsidies

Answer

Have the highest demand

Answer

Have the most advanced technology

Question 47

Which of the following is a potential negative impact of trade barriers on consumers?

Accepted Answer

Increased prices for imported goods

Answer

Increased availability of domestic goods

Answer

Lower quality of imported goods

Answer

Reduced variety of goods available

Question 48

Which of the following is a benefit of regional trade agreements for businesses?

Accepted Answer

Reduced tariffs and other trade barriers

Answer

Restrictions on access to foreign markets

Answer

Increased competition from foreign firms

Answer

Higher costs of production

Question 49

Which of the following is a measure of the level of trade protectionism implemented by a country?

Accepted Answer

Trade-weighted average tariff rate

Answer

Balance of trade

Answer

Gross domestic product

Answer

Exchange rate

Question 50

Which of the following is NOT a potential benefit of international trade for a country?

Accepted Answer

Job losses in certain industries due to increased competition

Answer

Access to a wider variety of goods and services

Answer

Potential for economic growth through increased exports

Answer

Lower prices for consumers due to increased imports

Question 51

A country has an absolute advantage in producing a good if it can produce it:

Accepted Answer

Using fewer resources or with lower opportunity cost than another country

Answer

With a larger workforce than another country

Answer

With a higher quality than another country

Answer

With more advanced technology than another country

Question 52

According to the theory of comparative advantage, countries should specialize in producing and exporting goods where they:

Accepted Answer

Have the lowest opportunity cost of production, even if they do not have an absolute advantage

Answer

Have the highest demand for the goods

Answer

Receive government subsidies for the production of those goods

Answer

Have the most advanced technology for producing the goods

Question 53

Which of the following is an example of a non-tariff barrier to trade?

Accepted Answer

A quota on the import of a specific type of product

Answer

A ban on the import of a certain type of good

Answer

A tax imposed on the import of a good

Answer

A subsidy provided to domestic producers of a good

Question 54

A subsidy provided to domestic producers of a good is likely to lead to:

Accepted Answer

Increased production of the subsidized good

Answer

Reduced demand for imported substitutes

Answer

Lower prices for consumers of the subsidized good

Answer

Increased competition in the domestic market for the subsidized good

Question 55

The World Trade Organization (WTO) is an international organization that aims to:

Accepted Answer

Promote free trade, reduce trade barriers, and facilitate the resolution of trade disputes

Answer

Protect domestic industries from foreign competition

Answer

Encourage the development of trade agreements between developing countries

Answer

Regulate the production and distribution of goods across countries

Question 56

Which of the following is a potential disadvantage of free trade for developing countries?

Accepted Answer

Competition from developed countries can harm domestic industries

Answer

It leads to lower prices for consumers

Answer

It encourages technological advancements

Question 57

A company decides to outsource its production to a country with lower labor costs. This is an example of:

Accepted Answer

Globalization

Answer

Protectionism

Answer

Fair trade

Answer

Mercantilism

Question 58

Which of the following is NOT a factor that can influence a country's terms of trade?

Accepted Answer

The political stability of the importing country

Answer

Changes in global demand for a specific good

Answer

Technological advancements in production

Answer

Fluctuations in exchange rates

Question 59

A country imposes a high tariff on imported cars. What is the most likely impact on the domestic car industry?

Accepted Answer

Increased protection and potential growth for domestic car manufacturers

Answer

A decrease in the demand for domestic cars

Answer

Increased competition and lower prices for consumers