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Self-test Questions
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1

To protect the competitiveness of domestic industries, which of the following is the preferred device, on economic grounds?
A)Subsidies
B)Tariffs
C)Quotas
D)All of the Above
2

Which one of the following statements is untrue?
A)International trade brings higher living standards by permitting greater specialisation .
B)In the short-run, all individuals benefit from international trade.
C)A country will always have a comparative advantage in something.
D)Self-sufficiency on the part of a nation will lower the real income levels of its inhabitants.
3

Suppose that the nation of Blund has a comparative disadvantage in the production of cocoa. Blund should:
A)Import cocoa
B)Produce cocoa for domestic consumption only
C)Produce cocoa for export only
D)Specialise in the production of cocoa in an attempt to increase productive efficiency
4

Suppose that the opportunity costs of production differ between two countries. We can conclude that:
A)It will not be possible for either country to gain from trading with the other.
B)If each country specialises and trades with the other, there will be an increase in the production of all commodities.
C)Each country should produce some of all goods to promote self-sufficiency.
D)Each country must have a comparative advantage of some goods.
5

A tariff is:
A)A payment to domestic producers to help them compete in international markets.
B)A mechanism for setting an absolute level on the number of units of a good that can be imported.
C)A tax on a product being exported.
D)A tax on a product being imported.
6

Which of the following best describes the gains expected from the Single European Market?
A)Efficient resource allocation
B)Scale economies
C)Greater competition
D)All of the above
7

Non-tariff barriers are:
A)Artificial differences in prices caused by import duties
B)Differences in national regulations which present free trade
C)Import duties
D)None of the above
8

Economies of scale can be exploited in a free trade area because:
A)Deregulation makes the market bigger
B)Segmentation no longer prevents them from being realised
C)National firms can expand production to compete in the wider market
D)All of the above
9

Which of the following often-used arguments for a tariff is not valid?
A)National defence
B)Externalities
C)Infant-industry
D)Cheap foreign labour
10

The imposition of tariffs to counter foreign subsidies and dumping may be valid only when such foreign actions are:
A)Legal
B)Temporary
C)Illegal
D)Permanent
11

Comparative advantage can reflect different factor availability.
A)TRUE
B)FALSE
12

When studying the principle of comparative advantage, it is the absolute cost of producing goods within different countries that determines if trade is worthwhile.
A)TRUE
B)FALSE
13

When intra-industry trade occurs, a country both imports and exports goods produced by a single industry.
A)TRUE
B)FALSE
14

The growth in international trade reflects economic and political support for freer international trade.
A)TRUE
B)FALSE
15

The growth in international trade reflects increasing globalisation.
A)TRUE
B)FALSE
16

Government support for training and learning could represent _____ ______ level source of international competitiveness.
A)An economy
B)A firm
C)An industrial
D)A government
17

Economies of scale in the domestic market could represent ____ ____ level source of international competitiveness.
A)An economy
B)A firm
C)An industrial
D)A government
18

Successful research and development could represent _______ ______ level source of international competitiveness.
A)An economy
B)A firm
C)An industrial
D)A government
19

The imposition of a tariff on a good will raise the _____ ______ .
A)World price
B)domestic price
C)world demand
D)domestic demand
20

Comparative advantage is important for ___________ .
A)Economies
B)Firms
C)Individuals
D)Everybody





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