International Trade Mock Test Quiz: Trivia!

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| By George Paily
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George Paily
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Quizzes Created: 3 | Total Attempts: 1,258
Questions: 10 | Attempts: 861

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International Trade Mock Test Quiz: Trivia! - Quiz

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Questions and Answers
  • 1. 

    Autarky implies that

    • A.

      A country’s consumption possibilities are the same as its production possibilities

    • B.

      Equilibrium has been reached with the maximum gains from specialization and trade

    • C.

      Equilibrium has been reached with the maximum amount of international trade

    • D.

      The nation has such a high standard of living that there are technically no poor people

    Correct Answer
    A. A country’s consumption possibilities are the same as its production possibilities
    Explanation
    Autarky is a situation of national self-sufficiency in which there is no economic interaction with foreigners.

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  • 2. 

    The terms of trade are?

    • A.

      the countries’ production possibilities curve

    • B.

      The autarky equilibrium

    • C.

      He length of time two individuals or countries have been trading

    • D.

      The exchange rates of two goods

    Correct Answer
    D. The exchange rates of two goods
    Explanation
    The value of different country’s currency differs from one another in terms of what each currency can buy.

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  • 3. 

    A nation’s consumption possibilities frontier is?

    • A.

      The same as its production possibilities frontier only if there is no international trade

    • B.

      Never the same as its production possibilities frontier

    • C.

      The same as its production possibilities frontier only if there is advantageous trade

    • D.

      Always the same as its production possibilities frontier

    Correct Answer
    A. The same as its production possibilities frontier only if there is no international trade
    Explanation
    If there is international trade a country’s consumption possibilities exceed its production possibilities.

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  • 4. 

    The gains from trade are due primarily to the fact that?

    • A.

      The wealth of large, industrialized nations can be spread throughout the world

    • B.

      Total world output increases when each country specializes

    • C.

      Countries can boost their economies by increasing exports

    • D.

      All the above

    Correct Answer
    B. Total world output increases when each country specializes
    Explanation
    By each county specializing in each country becomes more efficient for several reasons; one reason is that non-productive activity is eliminated. Total world output increases because of the resultant greater efficiency.

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  • 5. 

    The source of gains from trade is?

    • A.

      Tariffs

    • B.

      Self-sufficiency

    • C.

      Autarky equilibrium

    • D.

      Comparative advantage

    Correct Answer
    D. Comparative advantage
    Explanation
    The source of gains from trade is comparative advantage. Comparative advantage refers to the ability of a country or individual to produce a good or service at a lower opportunity cost than others. By specializing in the production of goods or services in which they have a comparative advantage, countries can trade with each other and benefit from the efficiency gains. This allows for the production of a greater variety of goods, lower prices, and higher overall economic welfare. Tariffs, self-sufficiency, and autarky equilibrium do not directly contribute to the gains from trade.

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  • 6. 

    Mutually beneficial trade cannot occur

    • A.

      When each country has its own comparative advantage

    • B.

      If one country has absolute advantages in the production of every good

    • C.

      When the opportunity costs of producing each good are equal for both trading partners

    • D.

      If total world production equals total world consumption

    Correct Answer
    C. When the opportunity costs of producing each good are equal for both trading partners
    Explanation
    Countries trade because they have different opportunity costs in producing goods and services.

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  • 7. 

    To maximize worldwide gains from trade, the country which should produce a good is the country that

    • A.

      Has the lowest opportunity cost of producing that good

    • B.

      Can produce that good using the fewest resources

    • C.

      Will produce that good using the most expensive resources

    • D.

      None of these

    Correct Answer
    A. Has the lowest opportunity cost of producing that good
    Explanation
    Since specialization makes possible an increase in productivity, the question becomes, what should a country specialize in? The answer is - it has the lowest opportunity cost.

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  • 8. 

    Comparative advantage

    • A.

      Exists only when one producer can make the product using fewer resources than any other producer

    • B.

      Leads to the most efficient allocation of resources and the greatest combined output

    • C.

      Eliminates specialization, so that each country produces all of its own needs independently

    • D.

      All the above are correct

    Correct Answer
    B. Leads to the most efficient allocation of resources and the greatest combined output
    Explanation
    When a country produces a good that it has a low opportunity cost, it is taking advantage of its comparative advantage. By producing goods with low opportunity costs it is giving up less in terms of foregone production than producing alternative goods.

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  • 9. 

    Which of the following is not an economic reason for international specialization?

    • A.

      Some countries have educated, trained workers, which other countries have unskilled workers

    • B.

      Tastes and preferences tend to be different in different countries

    • C.

      The world price of a good is determined by the world supply and demand for the product

    • D.

      There is no reason for specialization

    Correct Answer
    C. The world price of a good is determined by the world supply and demand for the product
    Explanation
    Even though C is a truthful statement, it does not explain why a country should specialize in the production of a particular good or service.

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  • 10. 

    When the world price of an internationally traded product is greater than a country’s domestic equilibrium price.

    • A.

      The domestic price will prevail, and the world price is irrelevant

    • B.

      The country’s import line is horizontal

    • C.

      The country’s exports of the product will increase

    • D.

      Can not be determined

    Correct Answer
    C. The country’s exports of the product will increase
    Explanation
    Goods are most often bought based on relative price differences between alternatives. If a country’s price of a good is less expensive than the alternative goods offered in the world market, demand will increase along with exports of that good.

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 22, 2014
    Quiz Created by
    George Paily
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