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International Trade Theories and Practices Quiz

#1

Which theory suggests that a country should specialize in the production of goods and services it can produce most efficiently?

Comparative advantage theory
Explanation

Specialization in most efficient production.

#2

Who proposed the theory of absolute advantage?

Adam Smith
Explanation

Theory proposed by Adam Smith.

#3

Which of the following is NOT a trade barrier?

Comparative advantage
Explanation

Not a trade barrier.

#4

What is the main purpose of the World Trade Organization (WTO)?

To promote fair competition
Explanation

Promotion of fair competition.

#5

What is the main objective of trade liberalization?

To promote free trade
Explanation

Promotion of free trade.

#6

Which of the following is NOT a principle of the mercantilist theory?

Promoting free trade
Explanation

Exclusion of promoting free trade.

#7

Which theory suggests that differences in factor endowments among countries lead to differences in comparative costs and hence determine patterns of trade?

Heckscher-Ohlin theory
Explanation

Factor endowments determine trade patterns.

#8

Which trade theory emphasizes the role of economies of scale in international trade?

New trade theory
Explanation

Emphasis on economies of scale.

#9

What is dumping in international trade?

Selling goods in foreign markets at a price lower than their production cost
Explanation

Selling below production cost in foreign markets.

#10

Which organization is responsible for facilitating negotiations and implementing trade agreements among member countries?

World Trade Organization (WTO)
Explanation

Facilitator of trade agreements.

#11

According to the product life cycle theory, in which stage of a product's life cycle is a country likely to become an importer of the product?

Introduction stage
Explanation

Importing stage in product life cycle.

#12

Which trade theory suggests that countries should specialize in the production and export of the goods that use their abundant factors of production?

Heckscher-Ohlin theory
Explanation

Specialization based on abundant factors.

#13

According to the Porter's Diamond Model, which factor refers to the presence of strong domestic competition that drives innovation and efficiency?

Firm strategy, structure, and rivalry
Explanation

Strong domestic competition driving innovation.

#14

What is the primary goal of export-oriented industrialization (EOI)?

To boost exports by promoting industries with a competitive advantage in international markets
Explanation

Boosting exports through competitive advantage.

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