McGraw-Hill OnlineMcGraw-Hill Higher EducationLearning Center
Student Centre | Lecturer Centre | Info Centre | HOME

Web Links
In The News
Buy Book
Student Self-tests
Crosswords

Jacket
Foundations of Economics, 2/e
David Begg, Birkbeck College, University of London, UK

Trade and development

Multiple Choice Quiz



1

International specialization takes place because of __________
A)differences in technology
B)differences in factor endowments
C)scale economies
D)all of the above
2

International differences in opportunity costs lead to countries acquiring __________
A)comparative advantage
B)high exchange rates
C)trade barriers
D)trade quotas
3

If a country does not have an absolute cost advantage in the production of a any good, there is no incentive to trade
A)TRUE
B)FALSE
4

The main cause of different relative costs between countries are ___________
A)relative factor competition
B)relative factor mobility
C)relative factor substitution
D)relative factor endowments
5

The level of the equilibrium exchange rate offsets international differences in ____________
A)comparative advantage
B)absolute advantage
C)opportunity cost
D)relative costs
6

International trade can never hurt any people
A)TRUE
B)FALSE
7

The imposition of a tariff causes consumption to _________ and imports to ________
A)rise, rise
B)fall, rise
C)fall, fall
D)rise, fall
8

A tariff causes domestic firms to __________ and consumers to __________
A)overproduce, underconsume
B)overproduce, overconsume
C)underproduce, underconsume
D)underproduce, overconsume
9

Tariffs always distort trade and are never justified.
A)TRUE
B)FALSE
10

An optimal tariff is one which reduces imports to the level at which _________ equals _______
A)imports, exports
B)the balance of trade, zero
C)the demand for currency, the supply of currency
D)social marginal cost, social marginal benefit
11

If goods are exported for less than society's marginal production cost and the marginal benefit to domestic consumers, it is likely that they benefit from ___________
A)an import subsidy
B)a quota
C)comparative advantage
D)an export subsidy
12

Export subsidies do not involve waste
A)TRUE
B)FALSE
13

Economic transition involves high inflation because ____________ and ___________
A)high monetary growth, high wages
B)high budget deficits, devaluation
C)high monetary growth, devaluation
D)prices surge from an artificially low level to their equilibrium level, the inflation tax is required as source of government revenue
14

Output fell sharply in the transition economies because
A)banks were unable to function
B)there was little corporate control
C)vital infrastructure was missing
D)all of the above
15

Most transition economies are seeking membership of the EU
A)TRUE
B)FALSE
16

All of the following represent obstacles to LDC development except
A)resource scarcity
B)low levels of investment
C)low population
D)poor infrastructure
E)poor human capital
17

LDCs often have a comparative advantage in the production of ___________
A)primary products
B)intermediate products
C)manufactured products
D)financial services
18

LDCs are reluctant to pursue development through the export of primary products because of _______________ and ________________
A)the upward trend in commodity prices, the stability of primary products real prices
B)the upward trend in commodity prices, the volatility of primary products real prices
C)the downward trend in commodity prices, the stability of primary products real prices
D)the downward trend in commodity prices, the volatility of primary products real prices
19

Buffer stocks increase price volatility in an unstable market
A)TRUE
B)FALSE
20

Import substitution is the replacement of _____________ by domestic production under the protection of ____________________
A)exports, subsidies
B)exports, patents
C)imports, high tariffs or import quotas
D)imports, subsidies
21

If a country has a burden of debt it cannot sustain it can _______________
A)reschedule debt
B)get a loan from an international organization
C)default on the loan
D)any of the above
22

If an LDC chooses structural adjustment as a strategy for development, it will nationalize its principle industries
A)TRUE
B)FALSE