International Trade: Benefits, Costs, and Policies - Economics Quiz

Question 1

Which of the following is a major benefit of international trade?

Accepted Answer

Increased consumer choice and lower prices

Answer

Reduced competition and higher consumer prices

Answer

Limited job opportunities and stifled economic growth

Answer

Increased government regulation and reduced innovation

Question 2

Which of the following can lead to gains from trade?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Protectionist policies

Answer

Currency appreciation

Question 3

What is a potential positive impact of the depreciation of the pound sterling on UK exports?

Accepted Answer

They become relatively cheaper for foreign buyers, potentially increasing demand

Answer

They become relatively more expensive for foreign buyers, potentially decreasing demand

Answer

Their quality improves, increasing their desirability

Answer

Their demand remains unaffected by exchange rate fluctuations

Question 4

Which of the following is a measure of the degree to which a country engages in international trade?

Accepted Answer

Trade openness ratio

Answer

Balance of trade

Answer

Current account balance

Answer

Gross domestic product (GDP)

Question 5

What is a potential impact of international trade on employment levels in a country?

Accepted Answer

It can lead to both job creation and job losses in different sectors

Answer

It always leads to an increase in employment

Answer

It always leads to a decrease in employment

Answer

It has no significant impact on employment levels

Question 6

Which of the following is a key factor influencing the direction of trade flows between countries?

Accepted Answer

Comparative costs and advantages

Answer

Government trade policies

Answer

Cultural preferences

Answer

Transportation infrastructure

Question 7

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

Accepted Answer

A trade deficit occurs when imports exceed exports; a trade surplus occurs when exports exceed imports

Answer

A trade deficit occurs when exports exceed imports; 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 a negative outcome, while a trade surplus is always a positive outcome

Question 8

What is the term for a situation where a country exports more than it imports?

Accepted Answer

Trade surplus

Answer

Trade deficit

Answer

Balance of payments

Answer

Comparative advantage

Question 9

Which of the following factors does NOT determine a country's comparative advantage?

Accepted Answer

Political stability

Answer

Availability of resources

Answer

Technological advancements

Answer

Labor costs

Question 10

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

Accepted Answer

To promote free trade and reduce trade barriers

Answer

To protect intellectual property rights

Answer

To provide loans to developing countries

Answer

To regulate international environmental standards

Question 11

What is the term for the exchange of goods and services between countries?

Accepted Answer

Trade

Answer

Imports

Answer

Exports

Answer

Investment

Question 12

What is the impact of a tariff on domestic prices?

Accepted Answer

Increases domestic prices

Answer

Decreases domestic prices

Answer

No impact on domestic prices

Answer

Reduces domestic prices, but only in the short term

Question 13

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

Accepted Answer

To promote free trade and reduce trade barriers

Answer

To regulate the movement of capital between countries

Answer

To provide financial assistance to developing countries

Answer

To negotiate peace treaties between member countries

Question 14

What is the underlying concept behind comparative advantage?

Accepted Answer

A country can benefit from trade even if it is not the most efficient producer of all goods.

Answer

A country should only produce goods that it can produce most efficiently.

Answer

Trade is always beneficial, regardless of the relative efficiency of different countries.

Answer

Comparative advantage is determined by the size of a country's population.

Question 15

The principle stating that countries should produce and export goods where they have a lower opportunity cost is known as:

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Theory of specialization

Answer

Free market principle

Question 16

A government policy that imposes a tax on imported goods is known as a:

Accepted Answer

Tariff

Answer

Quota

Answer

Embargo

Answer

Subsidy

Question 17

Quotas and tariffs are both trade policy tools, but they operate differently. What is the key difference between a quota and a tariff?

Accepted Answer

A quota restricts the quantity of goods that can be imported, while a tariff increases the price of imported goods

Answer

A tariff restricts the quantity of goods that can be imported, while a quota increases the price of imported goods

Answer

A quota increases the quantity of goods that can be imported, while a tariff restricts the price of imported goods

Answer

There is no difference between a quota and a tariff

Question 18

A tariff is a tax imposed on:

Accepted Answer

Imported goods

Answer

Domestically produced goods

Answer

Both domestically produced and imported goods

Answer

Neither domestically produced nor imported goods

Question 19

A country with a comparative advantage in producing a particular good will:

Accepted Answer

Produce more of that good at a lower cost than other countries

Answer

Consume more of that good than other countries

Answer

Export more of that good than other countries

Answer

Import more of that good than other countries

Question 20

Tariffs are primarily used with the specific goal of:

Accepted Answer

Raising the cost of imported goods

Answer

Increasing domestic production

Answer

Limiting the number of imported goods

Answer

Generating revenue for the government

Question 21

International trade can have a significant impact on economic growth. Which statement accurately reflects this impact?

Accepted Answer

It can promote economic growth through specialization and efficiency.

Answer

It inevitably leads to substantial job losses in certain sectors.

Answer

Its overall impact on economic growth is generally negative.

Answer

It has no significant effect on economic growth.

Question 22

An increase in the exchange rate between two countries typically leads to:

Accepted Answer

Cheaper imports and more expensive exports

Answer

More expensive imports and cheaper exports

Answer

No change in import or export prices

Answer

Increased trade volume between the two countries

Question 23

Free trade aims to achieve which of the following?

Accepted Answer

Eliminate barriers and restrictions on international trade

Answer

Protect and support domestic industries

Answer

Maximize government revenue from trade activities

Answer

Control and regulate the flow of goods and services

Question 24

When a country's currency depreciates, what happens to its exports and imports?

Accepted Answer

Exports increase and imports decrease

Answer

Exports decrease and imports increase

Answer

No change in exports or imports

Question 25

When a country's currency depreciates, what is the typical impact on its international trade?

Accepted Answer

Exports increase, and imports decrease.

Answer

Exports decrease, and imports increase.

Answer

Both exports and imports increase.

Answer

There is no impact on exports or imports.

Question 26

What is a potential advantage of government involvement in international trade, particularly for domestic industries?

Accepted Answer

Shielding domestic industries from international competition

Answer

Expanding consumer options

Answer

Reducing consumer prices

Question 27

How have technological advancements impacted international trade patterns and facilitated global economic integration?

Accepted Answer

Reduced transportation costs, enabling trade between distant countries

Answer

Increased communication barriers, hindering global collaboration

Answer

Restricted the spread of information technology, impeding cross-border knowledge exchange

Answer

Had a minimal impact on international trade patterns

Question 28

Protectionism is a trade policy that aims to:

Accepted Answer

Restrict imports to protect domestic industries

Answer

Promote free trade

Answer

Eliminate all barriers to trade

Answer

Provide subsidies to foreign producers

Question 29

The balance of trade refers to:

Accepted Answer

The difference between a country's exports and imports

Answer

The total value of a country's exports

Answer

The value of a country's imports relative to its exports

Answer

The amount of foreign investment a country receives

Question 30

The World Trade Organization (WTO) primarily focuses on:

Accepted Answer

Promoting free trade and reducing trade barriers

Answer

Setting standards for product safety and quality

Answer

Providing financial assistance to developing countries

Answer

Negotiating international investment agreements

Question 31

An import tariff is a:

Accepted Answer

Tax on goods imported into a country

Answer

Subsidy on goods exported from a country

Answer

Limit on the quantity of goods that can be imported

Answer

Ban on the import of certain goods

Question 32

The elasticity of demand for imports measures the:

Accepted Answer

Responsiveness of import demand to changes in price

Answer

Responsiveness of import supply to changes in price

Answer

Responsiveness of export demand to changes in income

Answer

Responsiveness of export supply to changes in price

Question 33

A quota is a:

Accepted Answer

Limit on the quantity of goods that can be traded

Answer

Tax on goods imported into a country

Answer

Subsidy on goods exported from a country

Answer

Ban on the trade of certain goods

Question 34

A key argument in favor of free trade is that it:

Accepted Answer

Promotes specialization and economic efficiency

Answer

Protects domestic industries from foreign competition

Answer

Reduces government involvement in the economy

Answer

Ensures equal distribution of wealth

Question 35

Which of the following is NOT an advantage of international trade?

Accepted Answer

Increased joblessness in export sectors

Answer

Increased competition

Answer

Lower prices for consumers

Answer

Access to new markets

Question 36

The elimination of trade barriers between nations is known as:

Accepted Answer

Free trade

Answer

Protectionism

Answer

Mercantilism

Answer

Fair trade

Question 37

The economic theory advocating for nations to specialize in producing goods where they possess a relative advantage is known as the:

Accepted Answer

Ricardian model

Answer

Heckscher-Ohlin model

Answer

Solow model

Answer

Gravity model

Question 38

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

Accepted Answer

Increased foreign investment opportunities

Answer

Exacerbated income inequality

Answer

Weakened environmental regulations

Answer

Reduced vulnerability to fluctuations in commodity prices

Question 39

Identify the option that is NOT a challenge associated with international trade:

Accepted Answer

Increased cooperation between nations

Answer

Exploitation of workers in developing nations

Answer

Cultural homogenization

Answer

Environmental degradation

Question 40

Which of the following is NOT an advantage of international trade?

Accepted Answer

It increases the cost of living for consumers.

Answer

It promotes economic growth.

Answer

It provides consumers with more choice.

Answer

It leads to increased specialization and efficiency.

Question 41

What is the key difference between a free trade area and a customs union?

Accepted Answer

A customs union has a common external tariff, while a free trade area does not.

Answer

A customs union is a type of free trade area.

Answer

A free trade area has a common currency, while a customs union does not.

Question 42

What is the World Trade Organization (WTO)?

Accepted Answer

An international organization that regulates global trade.

Answer

A trade union representing workers in the international trade sector.

Answer

A non-profit organization that promotes fair trade.

Question 43

What is the primary purpose of the General Agreement on Tariffs and Trade (GATT)?

Accepted Answer

To promote free trade by reducing trade barriers.

Answer

To protect intellectual property rights.

Answer

To provide financial assistance to developing countries.

Answer

To regulate the export of agricultural products.

Question 44

Which of these is NOT a benefit of international trade for a country?

Accepted Answer

Increased risk of economic instability

Answer

Access to a wider range of products and services

Answer

Potential for economic growth and job creation

Answer

Lower prices for consumers

Question 45

A country decides to place a tax on imported goods. This is an example of what type of trade policy?

Accepted Answer

Protectionism

Answer

Fair Trade

Answer

Globalization

Answer

Free Trade

Question 46

What is the main idea behind the theory of comparative advantage?

Accepted Answer

Countries should focus on producing goods and services where they have a lower opportunity cost.

Answer

Countries should prioritize exporting goods and services to earn more money.

Answer

Countries should focus on producing goods and services where they have a high demand.

Answer

Countries should aim to be self-sufficient in all goods and services.

Question 47

Which of the following could be a negative consequence of international trade for a country's economy?

Accepted Answer

Job losses in industries that struggle to compete with foreign producers

Answer

Improved access to foreign investment

Answer

Lower production costs for businesses

Answer

Increased consumer choice

Question 48

A country decides to remove all taxes and limits on imported goods. This is an example of which trade policy?

Accepted Answer

Free trade

Answer

Fair trade

Answer

Protectionism

Answer

Mercantilism

Question 49

What is the term used to describe the difference between the total value of a country's exports and imports?

Accepted Answer

Balance of trade

Answer

Terms of trade

Answer

Trade surplus

Answer

Trade deficit

Question 50

One country focuses on making and selling clothes, while another country focuses on making and selling electronics. This is an example of:

Accepted Answer

Specialization and trade

Answer

Globalization

Answer

Fair trade

Answer

Protectionism

Question 51

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

Accepted Answer

Promote free trade and reduce trade barriers

Answer

Regulate the flow of money between countries

Answer

Control the prices of global resources

Answer

Provide financial aid to developing countries

Question 52

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

Accepted Answer

Strict product safety rules

Answer

Import tariffs

Answer

Export subsidies

Answer

Currency devaluation

Question 53

A country is experiencing a trade deficit. This means it is:

Accepted Answer

Buying more goods and services from other countries than it is selling to them

Answer

Having a balanced trade

Answer

Selling more goods and services to other countries than it is buying from them