Master International Trade: Benefits, Costs, and Policies

Question 1

What is the term used to describe a government-imposed charge added to the price of imported goods?

Accepted Answer

Tariff

Answer

Quota

Answer

Embargo

Answer

Subsidy

Question 2

What is the primary effect of a tariff on domestic consumer prices?

Accepted Answer

Increases

Answer

Decreases

Answer

Has no effect

Answer

Depends on the elasticity of demand

Question 3

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

Accepted Answer

To promote free and fair international trade

Answer

To regulate global financial markets

Answer

To provide humanitarian aid to developing countries

Answer

To negotiate peace agreements between nations

Question 4

Which of the following characterizes a floating exchange rate system?

Accepted Answer

The value of the currency is determined by market forces

Answer

The government sets a fixed value for the currency

Answer

The currency is pegged to a specific foreign currency

Answer

The currency is backed by a physical commodity (e.g., gold)

Question 5

Which of the following is a specific advantage of participating in international trade?

Accepted Answer

Increased variety of goods available to consumers

Accepted Answer

Lower prices for goods purchased by consumers

Answer

Increased tax revenue for the government

Answer

Reduced job opportunities for domestic workers

Question 6

Which factor does NOT influence the volume of international trade?

Accepted Answer

Cultural preferences

Answer

Tariffs

Answer

Exchange rates

Answer

Transportation costs

Question 7

Which trade policy involves setting a limit on the quantity of goods that can be imported or exported?

Accepted Answer

Quota

Answer

Tariff

Answer

Subsidy

Answer

Embargo

Question 8

How does a quota impact consumer well-being?

Accepted Answer

Reduces consumer welfare by limiting availability and raising prices

Answer

Increases consumer welfare by lowering prices

Answer

Has a negligible impact on consumer welfare

Answer

Improves consumer welfare by enhancing competition

Question 9

Which of the following characterizes a country with a comparative advantage?

Accepted Answer

Can produce more of a good with fewer resources than another country

Answer

Can produce all goods with equal efficiency

Answer

Has no advantage in producing any goods

Answer

Produces goods more cheaply than any other country

Question 10

In the short term, how does international trade affect employment in import-competing industries?

Accepted Answer

Eliminates jobs

Answer

Creates jobs

Answer

Has no impact on jobs

Answer

Increases wages

Question 11

How does a subsidy affect domestic production?

Accepted Answer

Increases supply by lowering production costs

Answer

Decreases supply by raising production costs

Answer

Has no impact on supply

Answer

Reduces supply by increasing consumer demand

Question 12

How does international trade generally impact economic growth?

Accepted Answer

Enhances economic growth by driving competition and innovation

Answer

Hinders economic growth by diverting resources from domestic industries

Answer

Has no significant impact on economic growth

Answer

Slows economic growth by increasing dependence on foreign economies

Question 13

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

Accepted Answer

Environmental regulations

Answer

Import quota

Answer

Export subsidy

Answer

Free trade agreement

Question 14

Which of the following is a significant advantage of international trade?

Accepted Answer

All of the mentioned

Answer

Increased efficiency through specialization

Answer

Lowered consumer prices

Answer

Creation of new employment opportunities

Question 15

What accurately defines a tariff?

Accepted Answer

It is an import tax.

Answer

It is an export subsidy.

Answer

It restricts the quantity of imported goods.

Answer

It completely prohibits the import of goods.

Question 16

Describe the key distinction between a quota and a tariff.

Accepted Answer

A quota sets a limit on the volume of imports, while a tariff imposes a tax on imported goods.

Answer

A tariff restricts the amount of exports, while a quota imposes a tax on exported goods.

Answer

A quota establishes a minimum price for imports, while a tariff sets a maximum price.

Answer

There is no discernible difference between a quota and a tariff.

Question 17

What impact does a subsidy typically have on domestic production?

Accepted Answer

It stimulates domestic production.

Answer

It suppresses domestic production.

Answer

It has no discernible effect on domestic production.

Answer

The effect varies based on the type of subsidy.

Question 18

Explain the concept of comparative advantage.

Accepted Answer

Countries should prioritize producing goods they can produce more efficiently than others.

Answer

Countries should aim to produce everything they need, regardless of cost.

Answer

Countries should solely rely on imports to meet their needs.

Answer

Comparative advantage is a non-existent concept.

Question 19

What does the term 'balance of trade' refer to?

Accepted Answer

The difference between a country's exports and imports

Answer

The total value of a country's exports

Answer

The total value of a country's imports

Answer

The number of jobs created by a country's trade

Question 20

How does the exchange rate influence international trade?

Accepted Answer

Changes in the exchange rate can impact the prices of both imported and exported goods.

Answer

Exchange rates have no bearing on international trade.

Answer

Exchange rates solely affect the prices of exported goods.

Answer

Exchange rates only influence the prices of imported goods.

Question 21

Which of the following is a potential advantage of protectionist trade policies?

Accepted Answer

Increased employment in specific industries

Answer

Lower prices for consumers

Answer

Increased exports

Answer

Improved balance of payments

Question 22

What is the main objective of imposing a tariff?

Accepted Answer

To shield domestic industries from foreign competition

Answer

To generate revenue for the government

Answer

To stimulate exports

Answer

To discourage imports

Question 23

Explain the fundamental difference between a tariff and a quota:

Accepted Answer

A tariff is a tax levied on imported goods, while a quota sets a quantitative limit on the amount of imports.

Answer

A quota is a tax levied on imported goods, while a tariff sets a quantitative limit on the amount of imports.

Answer

There is no distinction between a tariff and a quota.

Answer

Both options A and B are correct.

Question 24

How does international trade generally affect consumer well-being?

Accepted Answer

It has the potential to lower prices and increase product variety.

Answer

It can lead to higher prices and a reduction in product variety.

Answer

It has no significant impact on consumer well-being.

Answer

Both options A and B are correct.

Question 25

Explain the distinction between absolute advantage and comparative advantage in the context of international trade:

Accepted Answer

Absolute advantage refers to producing a good with fewer resources, while comparative advantage refers to producing a good with a lower opportunity cost.

Answer

Comparative advantage refers to producing a good with fewer resources, while absolute advantage refers to producing a good with a lower opportunity cost.

Answer

There is no distinction between absolute advantage and comparative advantage.

Answer

Both options A and B are correct.

Question 26

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 discourage imports

Answer

To promote exports

Question 27

How does a quota differ from a tariff?

Accepted Answer

A quota restricts the quantity of goods that can be imported or exported, while a tariff imposes a tax on imported goods.

Answer

A tariff restricts the quantity of goods that can be imported or exported, while a quota imposes a tax on imported goods.

Answer

Quotas and tariffs are essentially the same type of trade barrier.

Answer

Both options a and b are incorrect.

Question 28

Which of the following is NOT listed as a benefit of international trade?

Accepted Answer

Reduced competition

Answer

Increased economic growth

Answer

Access to a wider range of goods and services

Answer

Lower consumer prices

Question 29

Which of the following is used as an indicator to compare the prices of goods and services across different countries?

Accepted Answer

Exchange rate

Answer

GDP per capita

Answer

Inflation rate

Answer

Interest rate

Question 30

Which of the following is an example of a trade agreement that aims to eliminate tariffs and other trade barriers between participating countries?

Accepted Answer

Free trade area

Answer

Import substitution

Answer

Export promotion

Question 31

Which of the following provides a comprehensive overview of a country's transactions with the rest of the world?

Accepted Answer

Balance of payments

Answer

Capital account balance

Answer

Terms of trade

Answer

Current account balance

Question 32

How do changes in exchange rates affect international trade? Explain how these fluctuations influence the competitiveness of domestic firms and trade flows.

Accepted Answer

A stronger domestic currency makes exports more expensive and imports cheaper, reducing competitiveness and potentially increasing the trade deficit.

Accepted Answer

A weaker domestic currency makes exports cheaper and imports more expensive, enhancing competitiveness and potentially decreasing the trade deficit.

Answer

Exchange rate fluctuations have no significant impact on international trade flows.

Question 33

How can international trade benefit countries, even if one country is more efficient in producing all goods compared to another country?

Accepted Answer

Trade allows countries to specialize in producing goods where they have a lower opportunity cost.

Answer

Trade reduces competition, leading to higher consumer prices.

Answer

Only the more efficient country benefits from trade.

Question 34

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

Accepted Answer

Stagnant economic growth

Answer

Access to a broader variety of goods

Answer

Increased consumer welfare

Answer

Job creation

Question 35

A tariff is a tax levied on:

Accepted Answer

Imported goods

Answer

Exported goods

Answer

Services

Answer

Domestically manufactured goods

Question 36

Which of the following could be a potential negative consequence of international trade?

Accepted Answer

Job losses in specific industries

Answer

Improved trade relations with other countries

Answer

Increased economic growth

Answer

Lower consumer prices

Question 37

A quota acts as a restriction on:

Accepted Answer

The quantity of goods that can be imported or exported

Answer

The price of goods

Answer

The type of goods that can be traded

Question 38

A subsidy is a financial incentive given by the government to:

Accepted Answer

Domestic producers

Answer

Importers

Answer

Consumers

Answer

Foreign producers

Question 39

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

Accepted Answer

Increased economic efficiency

Answer

Increased government revenue

Answer

Reduced consumer choice

Answer

Protection of domestic industries

Question 40

A trade deficit occurs when:

Accepted Answer

The value of imports surpasses the value of exports

Answer

Exports surpass the value of imports

Answer

Imports and exports are of equal value

Answer

The government intervenes in the market

Question 41

Which of the following could be a potential negative consequence of protectionist trade policies?

Accepted Answer

Reduced consumer welfare

Answer

Increased economic growth

Answer

Enhanced trade relations with other countries

Answer

Job creation

Question 42

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

Accepted Answer

Increased economic growth and consumer welfare

Answer

Lower wages for domestic workers

Answer

Increased government spending

Answer

Reduced employment opportunities

Question 43

Which of the following factors is a determinant of a country's comparative advantage in producing a particular good?

Accepted Answer

Availability of resources, technological advancements, and labor costs

Answer

Exchange rates and currency fluctuations

Answer

Cultural preferences and consumer demand

Answer

Government subsidies and tax incentives

Question 44

Which of the following is NOT a type of barrier to international trade?

Accepted Answer

Free trade agreements

Answer

Subsidies and non-tariff barriers

Answer

Tariffs and quotas

Answer

Exchange rate fluctuations

Question 45

What is the main purpose of a quota in international trade?

Accepted Answer

To limit the quantity of a specific good that can be imported or exported within a specified time frame

Answer

To promote economic growth and development

Answer

To protect domestic industries from foreign competition

Answer

To generate revenue for the government

Question 46

Which of the following is considered a positive externality resulting from increased international trade?

Accepted Answer

Enhanced technology transfer and knowledge diffusion

Answer

Increased pollution and environmental degradation

Answer

Widening income inequality and social disparities

Answer

Reduced consumer choice and product variety

Question 47

How does a tariff typically affect domestic consumers?

Accepted Answer

Increased prices for imported goods and services

Answer

Increased availability of foreign products

Answer

Improved quality of domestic goods

Answer

Lower taxes on domestic production

Question 48

Which of the following is a potential negative consequence of trade protectionism?

Accepted Answer

Reduced economic efficiency and higher consumer prices

Answer

Protection of domestic employment

Answer

Improved national security

Answer

Increased government revenue

Question 49

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

Accepted Answer

To facilitate global trade by promoting free trade, reducing trade barriers, and enforcing trade agreements

Answer

To provide financial aid to developing countries

Answer

To resolve international conflicts and disputes

Answer

To regulate environmental standards and sustainability practices

Question 50

What is the fundamental difference between a tariff and a subsidy in the context of international trade?

Accepted Answer

A tariff increases the cost of imported goods, while a subsidy reduces it

Answer

A tariff is imposed on exports, while a subsidy is granted on imports

Answer

A tariff is paid by consumers, while a subsidy is received by producers

Answer

A tariff promotes domestic industries, while a subsidy encourages foreign competition