#1
According to the theory of comparative advantage, a country should specialize in producing goods for export based on which principle?
The relative opportunity cost of production.
ExplanationSpecialize based on the relative opportunity cost of production.
#2
Which organization oversees international trade negotiations and dispute resolution?
World Trade Organization (WTO)
ExplanationWorld Trade Organization (WTO) oversees trade negotiations and dispute resolution.
#3
Which trade theory suggests that countries should specialize in the production of goods for which they have an absolute advantage?
Comparative advantage theory
ExplanationSpecialize based on absolute advantage, according to comparative advantage theory.
#4
What is the main objective of trade liberalization?
To reduce or eliminate barriers to trade
ExplanationTrade liberalization aims to reduce or eliminate trade barriers.
#5
Which trade theory suggests that countries should focus on producing and exporting goods that intensively use factors of production that are locally abundant and cheap?
Heckscher-Ohlin model
ExplanationHeckscher-Ohlin model suggests focusing on goods using local abundant factors.
#6
Which of the following is a fundamental assumption of the classical theory of international trade?
Perfect competition prevails in all markets.
ExplanationAssumes perfect competition in all markets.
#7
The Heckscher-Ohlin model predicts that countries will specialize in producing goods that:
Require abundant factors of production.
ExplanationPredicts specialization based on abundant factors of production.
#8
Which trade theory emphasizes the role of economies of scale and imperfect competition in explaining international trade patterns?
New trade theory
ExplanationNew trade theory emphasizes economies of scale and imperfect competition.
#9
Dumping occurs when a country sells its exports in a foreign market at a price:
Below the domestic price.
ExplanationSelling exports below domestic price.
#10
The concept of 'tariff escalation' refers to:
An increase in tariffs as the product moves through successive stages of production.
ExplanationTariff increases through successive production stages.
#11
In the context of trade policy, what is the main purpose of a voluntary export restraint (VER)?
To restrict exports voluntarily to avoid more severe trade barriers.
ExplanationRestrict exports voluntarily to avoid severe trade barriers.
#12
Which of the following trade policies is most likely to result in a trade surplus for a country?
Subsidizing domestic producers to increase output.
ExplanationSubsidizing domestic producers to boost output for a trade surplus.
#13
The concept of 'trade creation' in international trade theory refers to:
The shift from higher-cost domestic producers to lower-cost foreign producers after trade liberalization.
ExplanationShift to lower-cost foreign producers post-liberalization.
#14
The Smoot-Hawley Tariff Act of 1930 is known for:
Imposing high tariffs, exacerbating the Great Depression, and triggering retaliatory measures.
ExplanationImposed high tariffs, worsened Great Depression, triggered retaliatory measures.
#15
The 'most favored nation' principle in trade refers to:
Granting equal trade advantages to all nations within a trading bloc.
ExplanationGranting equal trade advantages within a trading bloc.