#1
What does the principle of comparative advantage in trade suggest?
Countries should produce only what they are most efficient at producing.
Countries should produce a variety of goods regardless of efficiency.
Countries should import all goods to maintain trade balance.
Countries should not engage in international trade.
#2
Who introduced the concept of comparative advantage?
Adam Smith
David Ricardo
John Maynard Keynes
Milton Friedman
#3
Which economist is associated with the concept of 'opportunity cost'?
Adam Smith
David Ricardo
John Maynard Keynes
Milton Friedman
#4
Which term describes the situation where a country can produce a good at a lower opportunity cost compared to another country?
Absolute advantage
Comparative advantage
Specialization
Trade barrier
#5
What is the term for the value of goods and services a country exports minus the value of what it imports?
Trade balance
Balance of payments
Trade surplus
Trade deficit
#6
What is the opportunity cost in the context of comparative advantage?
The cost of producing an additional unit of a good.
The value of the next best alternative forgone.
The total cost of production.
The cost of raw materials.
#7
In the theory of comparative advantage, what happens when two countries specialize and trade with each other?
Both countries benefit from increased production and consumption.
One country benefits while the other suffers.
Both countries experience a decrease in overall welfare.
Specialization has no impact on trade.
#8
Which of the following is NOT a condition for comparative advantage to hold?
Different opportunity costs between countries
Fixed exchange rates
Mobility of resources between industries
Absence of trade barriers
#9
What is the main difference between absolute advantage and comparative advantage?
Absolute advantage considers only labor costs.
Comparative advantage considers opportunity costs.
Absolute advantage is based on economies of scale.
Comparative advantage is based on natural resources.
#10
How does specialization according to comparative advantage affect global output?
It decreases global output.
It increases global output.
It has no effect on global output.
It depends on the industries involved.
#11
What is the law of comparative advantage?
A country should produce a good if its opportunity cost is lower than that of another country.
A country should produce a good if its absolute advantage is higher than that of another country.
A country should produce a good if its opportunity cost is higher than that of another country.
A country should produce a good if it has the highest demand for it.
#12
What factor can cause a country's comparative advantage to change over time?
Changes in technology
Changes in population size
Changes in government policies
Changes in currency exchange rates
#13
Which of the following is an example of a country benefiting from trade due to its comparative advantage?
A country producing all its goods domestically to protect jobs
A country importing goods it can produce more efficiently
A country imposing high tariffs on imports to raise revenue
A country exporting goods it can produce at a higher cost
#14
What is the relationship between specialization and comparative advantage?
Specialization leads to comparative advantage.
Comparative advantage leads to specialization.
There is no relationship between specialization and comparative advantage.
Specialization and comparative advantage are synonymous.
#15
What is the primary goal of international trade according to the principle of comparative advantage?
To maximize a country's absolute advantage
To minimize a country's opportunity cost
To increase global production and consumption
To maintain a balance of trade surplus
#16
Which of the following scenarios illustrates the concept of comparative advantage?
A country exporting all goods it produces
A country importing goods it can produce more efficiently
A country imposing tariffs on all imports
A country producing goods regardless of cost
#17
Which of the following statements best describes the relationship between specialization and comparative advantage?
Specialization is the basis of comparative advantage.
Comparative advantage leads to diversification, not specialization.
Specialization and comparative advantage are unrelated concepts.
Specialization and comparative advantage are interchangeable terms.
#18
Which of the following is an assumption of the theory of comparative advantage?
Resources are perfectly mobile between industries.
Countries have identical production functions.
Opportunity costs remain constant.
Trade barriers are imposed by all countries.
#19
Which of the following is an example of a country benefiting from trade despite not having an absolute advantage?
A country exporting goods it can produce more efficiently.
A country imposing high tariffs on all imports.
A country relying solely on domestic production.
A country importing goods regardless of cost.
#20
In the context of trade, what is meant by the term 'terms of trade'?
The ratio of exports to imports.
The conditions under which trade occurs.
The balance of trade surplus or deficit.
The rate at which one good can be exchanged for another.
#21
Which statement best describes the relationship between absolute advantage and comparative advantage?
A country with absolute advantage will also have comparative advantage.
A country with comparative advantage will also have absolute advantage.
A country with absolute advantage may not have comparative advantage.
A country with comparative advantage may not have absolute advantage.
#22
What are some limitations of the principle of comparative advantage?
It assumes constant opportunity costs.
It ignores transportation costs.
It assumes perfect competition.
All of the above.
#23
How can a country still benefit from trade even if it has an absolute advantage in all goods?
By focusing on producing goods with the highest demand.
By maintaining tariffs to protect domestic industries.
By exporting goods regardless of demand.
By specializing in goods it has a comparative advantage in.
#24
What effect does free trade have on the principle of comparative advantage?
It strengthens the principle by allowing countries to specialize according to their advantages.
It weakens the principle by increasing trade barriers.
It has no effect on the principle of comparative advantage.
It abolishes the principle altogether.
#25
What role do tariffs and quotas play in the context of comparative advantage?
They enhance a country's comparative advantage.
They mitigate the effects of comparative advantage.
They are irrelevant to the concept of comparative advantage.
They distort international trade by interfering with comparative advantage.