Question 1

Which of the following best describes the concept of 'absolute advantage' in international trade?

Accepted Answer

A country can produce more of a good with the same amount of resources than another country.

Question 2

According to the Heckscher-Ohlin Theory, a country will export goods that:

Accepted Answer

Use its abundant factors of production intensively.

Question 3

Which of the following is a key feature of mercantilism?

Accepted Answer

Maximizing exports and minimizing imports to accumulate wealth.

Question 4

A country imposes a specific tariff of $10 per unit on imported cars. If 1,000 cars are imported, what is the total tariff revenue collected?

Accepted Answer

$10,000

Question 5

Which of the following best explains the concept of 'first-mover advantage' in the New Trade Theory?

Accepted Answer

Firms that enter a market first can establish a dominant position due to economies of scale.

Question 6

If a country has a balance of payments deficit, which of the following is most likely to occur?

Accepted Answer

The country will need to borrow from foreign sources or use reserves.

Question 7

Which of the following is an example of a local content requirement?

Accepted Answer

A law requiring that 40% of the value of a car sold domestically must be produced within the country.

Question 8

Suppose the U.S. government imposes an ad valorem tariff of 20% on imported shoes. If the value of imported shoes is $500,000, what is the total tariff collected?

Accepted Answer

$100,000

Question 9

Which of the following best describes the difference between greenfield FDI and acquisition FDI?

Accepted Answer

Greenfield FDI involves building new facilities, while acquisition FDI involves purchasing existing firms.

Question 10

A multinational corporation (MNC) is considering two countries for investment. Country A has strict local content requirements, while Country B has none. Which is a likely consequence for the MNC if it chooses Country A?

Accepted Answer

The MNC will need to source more inputs locally, potentially increasing costs.

Question 11

Which of the following is a likely unintended consequence of imposing tariffs on imported coffee for political purposes?

Accepted Answer

Higher prices for domestic consumers and challenges for small businesses.

Question 12

If a country imposes an import quota on steel, what is the most likely effect on domestic steel producers?

Accepted Answer

Domestic steel producers will benefit from reduced foreign competition.

Question 13

Which of the following best describes the pragmatic view of Foreign Direct Investment (FDI)?

Accepted Answer

FDI should be encouraged only if it benefits the host country.

Question 14

A U.S. law requires that only U.S.-built ships can transport goods between U.S. ports. This is an example of:

Accepted Answer

The Jones Act, which is a form of protectionism.

Question 15

Which of the following is a potential disadvantage of anti-dumping duties?

Accepted Answer

They may lead to higher prices for domestic consumers.

Question 16

Suppose a country has the following balance of payments: exports = $$200 million, imports = 250 $$million, net income from abroad = $$30 million, and net transfers = 10 $$million. What is the current account balance?

Accepted Answer

$-10 million

Question 17

Which of the following best describes the concept of economies of scale?

Accepted Answer

As production increases, the average cost per unit decreases.

Question 18

A voluntary export restraint (VER) differs from an import quota in that:

Accepted Answer

A VER is a self-imposed export limit by the exporting country, while an import quota is imposed by the importing country.

Question 19

Which of the following is a likely effect of sustainability requirements on multinational corporations?

Accepted Answer

They may need to adopt environmentally friendly practices, potentially increasing costs in the short run.

Question 20

If a country imposes a mixed tariff of $$5 per unit plus 10% of the value on an imported good, and 100 units are imported at 20 $$each, what is the total tariff collected?

Accepted Answer

$700

International Trade and Policy: Key Concepts and Applications

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