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

Question 1

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

Accepted Answer

Lower consumer prices and increased economic growth

Answer

Increased competition and lower consumer prices

Answer

Increased risk of inflation and reduced economic growth

Answer

Increased risk of inflation and lower consumer prices

Question 2

What is the main goal of protectionism?

Accepted Answer

To reduce imports and increase domestic production

Answer

To increase imports and reduce the cost of living

Answer

To protect domestic industries and promote free trade

Answer

To increase exports and raise government revenue

Question 3

Which of the following is NOT a factor that influences trade patterns?

Accepted Answer

Comparative costs, government policies, and economic development

Answer

Comparative costs, government policies, and geographic distance

Answer

Cultural preferences, comparative costs, and government policies

Answer

Geographic distance, government policies, and cultural preferences

Question 4

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

Accepted Answer

To promote free trade and resolve trade disputes, as well as protect intellectual property rights

Answer

To provide financial assistance to developing countries and establish environmental standards for global trade

Answer

To resolve trade disputes and protect intellectual property rights

Answer

To promote free trade and provide financial assistance to developing countries

Question 5

What is the difference between a tariff and a quota?

Accepted Answer

A tariff is a tax on imports, while a quota is a restriction on the quantity of imports.

Answer

A quota is a tax on imports, while a tariff is a restriction on the quantity of imports.

Answer

Tariffs are always more effective than quotas at protecting domestic industries.

Answer

Quotas are always more effective than tariffs at protecting domestic industries.

Question 6

What is Gresham's Law?

Accepted Answer

Bad money drives out good money when both are used in a monetary system.

Answer

Good money drives out bad money when both are used in a monetary system.

Answer

Inflation is inevitable in all economies, and government intervention is necessary to prevent it.

Answer

The value of money is determined by its intrinsic worth.

Question 7

What is the role of exchange rates in international trade?

Accepted Answer

To determine the relative prices of goods and services in different countries and facilitate international trade

Answer

To protect domestic industries from foreign competition

Answer

To stabilize the global economy and redistribute wealth around the world

Answer

To control inflation and unemployment rates

Question 8

What is balance of payments?

Accepted Answer

A record of all economic transactions between a country and the rest of the world, including goods, services, and financial flows

Answer

A measure of a country's GDP, inflation rate, and unemployment rate

Answer

A measure of a country's trade surplus or deficit

Answer

A record of a country's foreign exchange reserves

Question 9

Which of the following is **not** a recognized advantage of international trade?

Accepted Answer

Diminished environmental damage

Answer

Increased variety of goods and services for consumers

Answer

Lower prices for products and services

Answer

Promotion of economic expansion

Question 10

What is a potential benefit of free trade agreements?

Accepted Answer

Greater variety of goods and lower prices for consumers

Answer

Higher tax income for the government

Answer

Slower economic growth

Question 11

According to the principle of comparative advantage, countries should specialize in producing goods and services:

Accepted Answer

For which they have the lowest absolute cost of production

Answer

For which they have the highest absolute cost of production

Answer

For which they have the most resources available

Answer

For which there is the greatest domestic demand

Question 12

What is the concept that explains why countries can gain from trade even if they do not have an absolute advantage in producing any good?

Accepted Answer

Comparative Advantage

Answer

Absolute Advantage

Answer

Law of Comparative Costs

Answer

Theory of Specialization

Question 13

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

Accepted Answer

Subsidies

Answer

Tariffs

Answer

Quotas

Answer

Embargoes

Question 14

Which government policy restricts the import of a specific good, increasing its price for domestic consumers?

Accepted Answer

Tariff

Answer

Quota

Answer

Subsidy

Answer

Embargo

Question 15

International trade offers myriad benefits. Which of the following is NOT a potential advantage?

Accepted Answer

Reduced variety of goods

Answer

Increased economic growth

Answer

Lower consumer prices

Answer

Access to new technologies

Question 16

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

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Economies of scale

Answer

Market segmentation

Question 17

Free trade has garnered criticism. Which of the following is NOT a potential drawback?

Accepted Answer

Strengthening of local industries

Answer

Environmental degradation

Answer

Exacerbation of income inequality

Answer

Exploitation of workers

Question 18

The World Trade Organization (WTO) plays a pivotal role in international trade. Which of the following is NOT a function of the WTO?

Accepted Answer

Enforcing labor standards

Answer

Promoting free trade

Answer

Settling trade disputes

Answer

Providing technical assistance to developing countries

Question 19

Clearly distinguish between a tariff and a quota.

Accepted Answer

A tariff is a tax on imported goods, while a quota restricts the number of imported goods permitted.

Answer

A quota is a tax on exported goods, while a tariff restricts the number of exported goods permitted.

Answer

A tariff directly restricts trade, while a quota indirectly restricts trade.

Answer

A quota directly restricts trade, while a tariff indirectly restricts trade.

Question 20

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

Accepted Answer

Reduced competition in domestic markets

Answer

Increased economic growth

Answer

Lower consumer prices

Answer

Accelerated technological advancements

Question 21

According to the concept of comparative advantage, countries should:

Accepted Answer

Specialize in producing goods they can produce most efficiently

Answer

Produce all goods domestically, regardless of efficiency

Answer

Import all goods from other countries

Answer

Export only goods they have a surplus of

Question 22

The World Trade Organization (WTO) primarily aims to:

Accepted Answer

Promote free trade and reduce trade barriers

Answer

Protect domestic industries from foreign competition

Answer

Negotiate trade agreements between countries

Answer

Resolve trade disputes

Question 23

A country has a trade deficit when it:

Accepted Answer

Imports more goods and services than it exports

Answer

Exports more goods and services than it imports

Answer

Has a balanced trade account

Answer

Has a positive balance of payments

Question 24

The term 'balance of payments' refers to:

Accepted Answer

A country's record of all economic transactions with other countries

Answer

The difference between a country's exports and imports

Answer

The value of a country's currency relative to other currencies

Answer

The amount of foreign aid a country receives

Question 25

Which of the following is a potential negative impact of international trade on economic growth and development?

Accepted Answer

Increased job losses

Answer

Increased specialization

Answer

Reduced consumer prices

Answer

Improved technology transfer

Question 26

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

Accepted Answer

That they can produce most efficiently

Answer

That other countries cannot produce

Answer

That are in high demand globally

Answer

That generate the highest profits

Question 27

The balance of trade measures:

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 ratio of a country's exports to its imports

Question 28

Free trade agreements typically aim to:

Accepted Answer

Reduce tariffs and other trade barriers

Answer

Increase government intervention in trade

Answer

Protect specific industries from competition

Answer

Raise prices for consumers

Question 29

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

Accepted Answer

Higher prices for consumers

Answer

Improved economic efficiency

Answer

Increased government revenue

Answer

Higher wages for domestic workers

Question 30

How does economic interdependence influence the nature and flow of international trade?

Accepted Answer

Nations specialize in producing goods and services where they have a comparative advantage.

Answer

International trade decreases due to heightened competition among nations.

Answer

Trade patterns become more evenly distributed and symmetrical.

Answer

Economic growth is hindered by increased reliance on foreign goods.

Question 31

Which of the following is a potential benefit of engaging in international trade?

Accepted Answer

Increased economic growth

Answer

Higher unemployment rates

Answer

Lowered average standard of living

Answer

Reduced national security

Question 32

The concept of comparative advantage suggests that countries should:

Accepted Answer

Specialize in producing and exporting goods and services that they can produce relatively more efficiently compared to other countries.

Answer

Avoid importing any goods and services.

Question 33

Which of the following is a potential cost or negative impact of international trade?

Accepted Answer

Job losses in specific industries due to increased competition from imports

Answer

Increased cultural diversity

Answer

Improved environmental standards

Answer

Enhanced technological innovation

Question 34

Tariffs are a type of trade barrier that:

Accepted Answer

Impose a tax on imported goods, making them more expensive for consumers

Answer

Provide subsidies to domestic producers, making it cheaper for them to produce goods

Answer

Eliminate all import duties, making it cheaper to import goods

Answer

Restrict the quantity of goods that can be imported, limiting the availability of foreign products

Question 35

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

Accepted Answer

Promotes free trade, reduces trade barriers, and facilitates the negotiation of trade agreements among its member countries

Answer

Regulates the global banking system and financial institutions

Answer

Provides humanitarian aid and assistance to developing countries

Answer

Sets global environmental standards and regulations

Question 36

Which of the following is a potential argument in favor of adopting protectionist trade policies?

Accepted Answer

Protecting domestic industries from foreign competition and preserving jobs

Answer

Encouraging innovation and technological development

Answer

Promoting economic growth through increased exports

Question 37

The balance of trade refers to:

Accepted Answer

The difference between a country's total exports and total imports over a specific period

Answer

The total value of a country's exports only

Answer

The total value of a country's imports only

Question 38

Which of the following is a potential impact of globalization on international trade?

Accepted Answer

Increased interdependence among countries and interconnectedness of global markets

Answer

Reduced government regulation and deregulation of trade

Answer

Elimination of cultural diversity and homogenization of global culture

Answer

Lowered labor costs and increased availability of cheap labor

Question 39

The term 'currency devaluation' refers to:

Accepted Answer

A deliberate reduction in the value of a country's currency relative to other currencies, typically done by central banks or governments

Answer

The complete elimination of the value of a country's currency, rendering it worthless

Answer

An increase in the value of a country's currency relative to other currencies, also known as currency appreciation

Question 40

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

Accepted Answer

Increased efficiency and specialization

Answer

Reduced consumer purchasing power

Answer

Lowered domestic employment rates

Question 41

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

Accepted Answer

Lower opportunity cost

Answer

Higher absolute advantage

Answer

Lower production costs

Answer

Higher demand

Question 42

What is a tariff?

Accepted Answer

A tax imposed on imported goods

Answer

A quota on domestic production

Answer

A subsidy for exported goods

Answer

A restriction on foreign investment

Question 43

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

Accepted Answer

Product safety standards

Answer

Subsidies for domestic producers

Answer

Import duties

Answer

Export quotas

Question 44

Which international organization facilitates free trade and reduces trade barriers?

Accepted Answer

World Trade Organization (WTO)

Answer

United Nations

Answer

International Monetary Fund (IMF)

Answer

World Bank

Question 45

What is the term for the difference between a country's exports and imports?

Accepted Answer

Balance of trade

Answer

Budget deficit

Answer

Balance of payments

Answer

Current account deficit

Question 46

Which factor influences the direction of trade flows?

Accepted Answer

Comparative costs and prices

Answer

Government policies solely

Answer

Exchange rates solely

Answer

Transportation expenses solely

Question 47

Which of the following is an advantage of free trade?

Accepted Answer

Increased consumer options

Answer

Guaranteed profits for domestic industries

Answer

Protection of low-skill jobs

Answer

Reduced overall economic efficiency

Question 48

Which of the following statements BEST summarizes a key benefit of international trade?

Accepted Answer

It allows countries to specialize in producing goods and services where they have a comparative advantage.

Answer

It eliminates the need for domestic production.

Answer

It ensures that all countries have access to the same goods and services.

Question 49

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing and exporting goods and services that they can produce more efficiently (at a lower opportunity cost).

Answer

Aim to produce all goods and services domestically, even if it is less efficient.

Answer

Focus on importing goods and services from other countries, regardless of cost.

Question 50

Which of the following is NOT a common trade policy instrument used by governments?

Accepted Answer

Monetary policy

Answer

Quotas

Answer

Tariffs

Question 51

A quota is a government-imposed restriction that:

Accepted Answer

Limits the quantity of a particular good that can be imported or exported.

Answer

Sets a minimum price for a particular good.

Answer

Imposes a tax on the production of a particular good.

Question 52

The World Trade Organization (WTO) is an international organization that primarily focuses on:

Accepted Answer

Promoting free trade and resolving trade disputes among its member countries.

Answer

Regulating the global financial system.

Answer

Enforcing environmental regulations.

Answer

Providing financial aid to developing countries.

Question 53

A country that exports more goods and services than it imports has a:

Accepted Answer

Trade surplus

Answer

Trade deficit

Answer

Capital account surplus

Answer

Current account deficit

Question 54

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

Accepted Answer

Job losses in certain domestic industries due to increased competition from imports.

Answer

Increased economic growth.

Answer

Improved access to technology and innovation.

Answer

Lower consumer prices for imported goods.

Question 55

The exchange rate is typically defined as the:

Accepted Answer

Price of one currency in terms of another currency.

Answer

Amount of foreign aid received by a country.

Answer

Interest rate on a loan.

Answer

Rate of inflation in a country.