Master International Trade: Enhance Your Economics Expertise

Question 1

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

Accepted Answer

A comparative advantage in production costs

Answer

An absolute advantage in production costs

Answer

A higher level of technology

Answer

A larger workforce

Question 2

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

Accepted Answer

Job losses in export-oriented industries

Answer

Lower consumer prices

Answer

Increased economic growth

Answer

Improved technology transfer

Question 3

A tariff is defined as a tax imposed on:

Accepted Answer

Imported goods

Answer

Exported goods

Answer

Domestically produced goods

Answer

Services

Question 4

Which of the following is considered the most restrictive type of trade barrier?

Accepted Answer

Embargoes

Answer

Tariffs

Answer

Quotas

Answer

Voluntary export restraints

Question 5

The exchange rate between two currencies is:

Accepted Answer

The price of one currency in terms of another

Answer

The amount of one currency that can be exchanged for another

Answer

The difference in interest rates between two countries

Answer

The rate at which inflation occurs in two countries

Question 6

The balance of payments comprises a record of:

Accepted Answer

All economic transactions between a country and the rest of the world

Answer

Only the financial transactions between a country and the rest of the world

Answer

Only the trade in goods and services between a country and the rest of the world

Answer

Only the government's fiscal transactions

Question 7

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

Accepted Answer

Lower opportunity cost

Answer

Higher import tariff

Answer

Higher absolute advantage

Answer

Higher export quota

Question 8

Which of the following is not a barrier to international trade?

Accepted Answer

Cultural similarities

Answer

Tariffs

Answer

Exchange rate fluctuations

Answer

Language barriers

Question 9

A devaluation of a country's currency will typically lead to:

Accepted Answer

An increase in exports and a decrease in imports

Answer

An increase in imports and a decrease in exports

Answer

No change in trade flows

Answer

A decrease in both exports and imports

Question 10

The concept of elasticity in international trade refers to:

Accepted Answer

The responsiveness of supply or demand to changes in factors such as price

Answer

The ability of a country to negotiate favorable trade terms

Answer

The degree of protectionism adopted by a country

Answer

The volume of trade between two countries

Question 11

Which factor is NOT a determinant of comparative advantage in international trade?

Accepted Answer

Consumer preferences

Answer

Relative availability of production factors

Answer

Technological advancements

Answer

Government trade policies

Question 12

According to the Heckscher-Ohlin theorem, countries tend to export goods that:

Accepted Answer

Utilize their abundant production factors intensively

Answer

Utilize their scarce production factors intensively

Answer

Have the highest production costs

Answer

Have the lowest production costs

Question 13

Which potential benefit of international trade includes offering consumers a wider range of choices?

Accepted Answer

Increased consumer choice

Answer

Lower prices for goods and services

Answer

Increased economic growth

Answer

Improved environmental sustainability

Question 14

The concept of 'infant industry' protectionism implies that:

Accepted Answer

Domestic industries need temporary protection from foreign competition to become established

Answer

Governments should provide ongoing subsidies to uncompetitive industries

Answer

Developing countries should focus on producing all goods domestically

Answer

International trade should be limited to essential commodities

Question 15

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

Accepted Answer

The highest relative advantage

Answer

The highest absolute advantage

Answer

The lowest absolute advantage

Answer

The lowest relative advantage

Question 16

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

Accepted Answer

Reduced government spending

Answer

Increased consumer choice

Answer

Lower production costs

Answer

Higher economic growth

Question 17

Which of the following factors is NOT likely to lead to a depreciation of a country's currency?

Accepted Answer

A decrease in government spending

Answer

A decrease in exports

Answer

An increase in imports

Answer

A decrease in foreign investment

Question 18

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

Accepted Answer

To promote free trade and reduce trade barriers

Answer

To provide financial assistance to developing countries

Answer

To regulate international trade in agricultural products

Answer

To negotiate peace agreements between nations

Question 19

Which of the following is a characteristic of a floating exchange rate regime?

Accepted Answer

The exchange rate is determined by market forces.

Answer

The exchange rate is fixed by the government.

Answer

The exchange rate is pegged to another currency.

Answer

The exchange rate is adjusted regularly by the central bank.

Question 20

Which of the following is NOT a tool of trade policy?

Accepted Answer

Monetary policy

Answer

Tariffs

Answer

Quotas

Answer

Subsidies

Question 21

Which factor does NOT influence a country's comparative advantage?

Accepted Answer

Government policies

Answer

Abundance of natural resources

Answer

Level of technological advancement

Answer

Geographic location

Question 22

Tariffs are trade restrictions that:

Accepted Answer

Both increase the price and decrease the quantity of imported goods

Answer

Increase the price of imported goods

Answer

Decrease the quantity of imported goods

Answer

Neither increase the price nor decrease the quantity of imported goods

Question 23

The balance of payments measures:

Accepted Answer

Both the flow of goods and services and financial assets into and out of a country

Answer

The flow of goods and services into and out of a country

Answer

The flow of financial assets into and out of a country

Answer

Neither the flow of goods and services nor financial assets into and out of a country

Question 24

A potential drawback of international trade is:

Accepted Answer

Income inequality

Answer

Increased consumer choice

Answer

Lower prices

Answer

Faster economic growth

Question 25

How does a quota differ from a tariff?

Accepted Answer

A quota restricts the quantity of imports, while a tariff imposes a tax.

Answer

A tariff restricts the quantity of imports, while a quota imposes a tax.

Answer

Quotas and tariffs both limit the quantity of imports, but tariffs generate government revenue.

Answer

Quotas and tariffs both impose taxes on imports, but quotas limit the quantity.

Question 26

How does an appreciation in the value of a country's currency affect its exports?

Accepted Answer

Exports become more expensive and less competitive.

Answer

Exports become cheaper and more competitive.

Answer

There is no significant impact on exports.

Answer

Exports become cheaper, but their competitiveness remains unchanged.

Question 27

Which of the following is NOT considered a potential advantage of free trade?

Accepted Answer

Protection of specific domestic industries

Answer

Greater consumer choice and variety of goods

Answer

Lower prices for consumers

Answer

Job creation and economic growth

Question 28

What is the main rationale behind the "infant industry" argument for tariffs?

Accepted Answer

To allow new domestic industries time to develop and become competitive.

Answer

To permanently protect domestic industries from foreign competition.

Answer

To generate government revenue for essential public services.

Answer

To promote innovation in domestic industries.

Question 29

The concept of "gains from trade" in international economics refers to:

Accepted Answer

The increase in consumer and producer welfare resulting from trade

Answer

The reduction in trade costs due to advancements in technology

Answer

The economic growth generated by increased exports

Answer

The elimination of trade barriers between countries

Question 30

How can regional trade agreements (RTAs) contribute to economic integration?

Accepted Answer

RTAs can promote economic integration by lowering trade barriers and encouraging collaboration between member nations.

Answer

RTAs always lead to successful economic integration.

Answer

RTAs have no impact on economic integration.

Question 31

How has technological advancement influenced international trade and the concept of comparative advantage?

Accepted Answer

Promoted specialization and efficiency gains

Accepted Answer

Reduced market entry barriers

Answer

Diminished the relevance of comparative advantage

Answer

Had a minimal impact on trade patterns

Question 32

In international trade, how do trade unions primarily advocate for workers' rights?

Accepted Answer

Lobbying for higher wages and better working conditions

Answer

Offering job training and placement assistance

Answer

Investing in businesses with fair trade practices

Question 33

Which theory of international trade suggests that countries should focus on producing and exporting goods in which they have a lower opportunity cost?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Mercantilism

Answer

Protectionism

Question 34

What is a primary function of tariffs?

Accepted Answer

To generate revenue or protect domestic industries

Answer

To stimulate economic growth

Answer

To stabilize exchange rates

Answer

To control inflation

Question 35

How do exchange rates impact international trade?

Accepted Answer

Exchange rates influence the prices of traded goods, affecting their competitiveness.

Answer

Exchange rates have no bearing on international trade.

Answer

Exchange rates are solely determined by trade volumes.

Question 36

What are potential advantages of free trade?

Accepted Answer

Enhanced consumer choice, economic growth, and efficiency

Answer

Increased government revenue, job losses, and trade deficits

Answer

Higher prices for domestic consumers, worsening pollution, and worker exploitation

Question 37

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

Accepted Answer

To foster free and fair trade by establishing rules and resolving disputes.

Answer

To provide financial aid to developing countries

Answer

To regulate the quality of traded goods

Question 38

Which of the following is a potential negative outcome of international trade?

Accepted Answer

Job losses in specific industries

Answer

Reduced economic growth

Answer

Higher consumer prices

Answer

Technological stagnation

Question 39

Define the difference between a trade surplus and a trade deficit.

Accepted Answer

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

Answer

A trade surplus is always positive for a country, while a trade deficit is always negative.

Question 40

Which factors influence the demand for imports?

Accepted Answer

Domestic income, exchange rates, and consumer preferences

Answer

Only domestic income

Answer

Only exchange rates

Question 41

Explain the key concept of the Heckscher-Ohlin model in international trade.

Accepted Answer

The model suggests that countries tend to export goods that utilize their relatively abundant factors of production.

Answer

The model suggests that countries tend to import goods that utilize their relatively scarce factors of production.