Introduction to International Trade MCQs

Question. According to this theory, the holdings of a country’s treasure primarily in the form of gold constituted its wealth.
(a) Gold Theory
(b) Ricardo Theory
(c) Mercantilism
(d) Hecksher Theory

Answer: C

Question. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
(a) Military capabilities
(b) labor productivities
(c) relative availabilities of factors of production
(d) tastes

Answer: C

Question. The Heckscher- Ohlin model is principally focused on what aspect of economics?
(a) International trade
(b) Supply and demand
(c) Normative economics
(d) Production possibility frontier

Answer: A

Question. Which of the following trade policies limits specified quantity of goods to be imported at one tariff rate?
(a) Quota
(b) Import tariff
(c) Specific tariff
(d) all of the options

Answer: D

Question. Nations conduct international trade because:
(a) Some nations prefer to produce one thing while others produce other things.
(b) Resources are not equally distributed among all trading nations.
(c) Trade enhances opportunities to accumulate profits.
(d) Interest rates are not identical in all trading nations

Answer: B

Question. What was the first economic theory of international trade to be developed?
(a) The theory of mercantilism
(b) The theory of comparative advantage
(c) The theory of absolute advantage
(d) The Heckscher-Ohlin theory

Answer: A

Question. International Trade is most likely to generate short-term unemployment in:
(a) Industries in which there are neither imports nor exports
(b) Import-competing industries
(c) Industries that sell to domestic and foreign buyers.
(d) Industries that sell to only foreign buyers

Answer: B

Question. The theory of comparative cost advantage is given by
(a) David Ricardo
(b) Adam Smith
(c) F W Taussig
(d) Ohlin and Heckscher

Answer: A

Question. Mercantilists believed that a country could increase the amount of wealth it had by _____.
(a) Promoting exports and discouraging imports
(b) Discouraging exports and promoting imports
(c) Controlling imports and exports
(d) Increasing both imports and exports

Answer: A

Question. The Theory of Relative Factor Endowments is given by
(a) David Ricardo
(b) Adam Smith
(c) c. F W Taussig
(d) Ohlin and Hecksher

Answer: D

Question. International trade forces domestic firms to become more competitive in terms of
(a) The introduction of new products
(b) Product design and quality
(c) Product price
(d) all of the options

Question. The movement to free international trade is most likely to generate short-term unemployment in which industries
(a) Industries in which there are neither imports nor exports
(b) Import-competing industries.
(c) Industries that sell to domestic and foreign buyers
(d) Industries that sell to only foreign buyers

Answer: B

Answer: D

Question. Increased foreign competition tend to
(a) Intensify inflationary pressure at home
(b) Induce falling output per worker-hour for domestic workers
(c) Place constraints on the wages of domestic workers
(d) Increase profits of domestic import-competing industries

Answer: C

Question. ………………is the payment method most often used in International Trade which offers the exporter best assurance of being paid for the products sold internationally.
(a) Bill of Lading
(b) Letter of Credit
(c) Open Account
(d) Drafts

Answer: B

Question. How is comparative advantage defined?
(a) You produce the things you are especially good at, and buy from others, the goods you are less efficient in producing.
(b) To produce and consume all goods without trade.
(c) How the world actually works.
(d) Globalization, growing economic linkages among countries.

Answer: A

Question. What are the four factor endowments?
(a) National resources, labor, physical capital and human capital
(b) Types of technology
(c) Material inputs used up in the process of production
(d) International differences in climate

Question. Transportation cost of trade affects:
(a) pattern of trade
(b) boundaries between tradable and non-tradable goods
(c) Global supply chains
(d) all of the options

Answer: D

Answer: A

Question. Key controllable factors in global marketing are:
(a) Government policy and legislation
(b) social and technical changes
(c) marketing activities and plans
(d) all of the options.

Answer: C

Question. The first phase of globalization started around 1870 and ended with …..
(a) World War I
(b) World War II
(c) The Establishment of GATT
(d) In 1913 when GDP was High

Answer: A

Question. A no-trade world will have which of the following characteristics:
(a) Countries will have same relative endowments of production factors
(b) Consumers across countries will have identical and homogenous tastes
(c) There will be no distortions or externalities
(d) all of the options

Answer: D

Question. The Theory of Absolute Cost Advantage is given by
(a) David Ricardo
(b) Adam Smith
(c) F W Taylor
(d) Ohlin and Heckscher

Answer: B

Question. Comparative Cost Trade Theory is given by
(a) Adam Smith
(b) David Ricardo
(c) Gottfried Haberle
(d) Heckscher Ohlin

Answer: B

Question. According to Adam Smith, the trade between countries should happen _____.
(a) Naturally according to the market forces
(b) Under government regulation
(c) Using factors that are available
(d) Only when a country has an absolute advantage

Answer: D

Question. Globalization refers to:
(a) Lower incomes worldwide
(b) Less foreign trade and investment
(c) Global warming and their effects
(d) A more integrated and interdependent world

Answer: D

Question. If a nation has an open economy it means that the nation:
(a) Allows private ownership of capital.
(b) Has flexible exchange rates
(c) Has fixed exchange rates
(d) Conducts trade with other countries

Answer: D

Answer the following questions based on the production table below:

Question. If the countries were to trade along the lines of absolute advantage:
(a) A would export X to B
(b) B would import Y from A
(c) Neither country would want to trade

Answer: B

Question. Country A has an absolute advantage in
(a) Product X
(b) Product Y
(c) Neither X nor Y
(d) Both X and Y

Answer: B

Question. If countries were to trade along the lines of comparative advantage:
(a) A would export X to B
(b) A would export Y to B
(c) Neither country would want to trade

Answer: B

Question. Country B has an absolute advantage in
(a) Product X
(b) Product Y
(c) Neither X nor Y
(d) Both X and Y

Answer: A

Question. According to the principle of comparative advantage:
(a) South Korea should export steel
(b) South Korea should export steel and DVDs
(c) Japan should export steel
(d) Japan should export steel and DVDs

Answer: A

Question. The opportunity cost of one DVD in Japan:
(a) One ton of steel
(b) Two tons of steel
(c) Three tons of steel
(d) Four tons of steel

Answer: A

Question. The opportunity cost of one DVD in South Korea is:
(a) One-half ton of steel
(b) One ton of steel
(c) One and one-half tons of steel
(d) Two tons of steel

Answer: D