#1
Which theory suggests that a country should specialize in producing goods for which it has the lowest opportunity cost?
Comparative advantage theory
ExplanationCountries should focus on goods with the lowest opportunity cost.
#2
Who developed the theory of absolute advantage?
Adam Smith
ExplanationAdam Smith is the father of absolute advantage theory.
#3
Which organization facilitates international trade negotiations and resolves disputes between member countries?
World Trade Organization (WTO)
ExplanationWTO facilitates trade negotiations and resolves disputes.
#4
What is the main purpose of a tariff?
To restrict imports
ExplanationTariffs aim to restrict the flow of imports.
#5
Which term describes the situation where a country imports more goods and services than it exports?
Trade deficit
ExplanationTrade deficit: imports exceed exports.
#6
Which of the following is NOT a barrier to international trade?
Free trade agreements
ExplanationFree trade agreements promote, not restrict, international trade.
#7
Which of the following is a trade policy aimed at restricting imports through quotas, tariffs, or other barriers?
Protectionism
ExplanationProtectionism restricts imports through various barriers.
#8
According to the Heckscher-Ohlin model, which factor determines a country's comparative advantage?
Factor endowment
ExplanationComparative advantage is determined by factor endowment.
#9
Which trade policy aims to support domestic producers by providing financial assistance or other incentives?
Subsidies
ExplanationSubsidies support domestic producers with incentives.
#10
The concept of 'Dumping' in international trade refers to:
Selling goods below production cost in the domestic market
ExplanationDumping involves selling goods below domestic production cost.
#11
The concept of 'Comparative Advantage' was developed by:
David Ricardo
ExplanationDavid Ricardo introduced the concept of comparative advantage.
#12
Which trade theory argues that differences in technology levels among nations are the primary factor driving international trade?
Product life-cycle theory
ExplanationTechnology differences drive international trade in product life-cycle theory.
#13
Which trade theory argues that the pattern of international trade is determined by differences in labor productivity?
Factor proportions theory
ExplanationTrade patterns depend on differences in labor productivity.
#14
Which trade theory suggests that countries should focus on exporting goods that intensively use the factors of production they have in abundance?
Factor proportions theory
ExplanationExport goods using abundant factors of production.
#15
Which trade policy seeks to eliminate all restrictions on trade and investment between countries?
Free trade policy
ExplanationFree trade policy aims for unrestricted trade and investment.
#16
Which trade policy aims to artificially lower the price of exported goods to gain a competitive advantage in foreign markets?
Dumping
ExplanationDumping lowers export prices for a competitive advantage.
#17
Which trade theory suggests that countries tend to export goods that use their abundant factors of production?
Factor proportions theory
ExplanationExport goods using abundant factors of production in factor proportions theory.