Chapter 27 Self-test questions

When a country trades with other countries, it is __________ but where the country is in autarchy, then it is __________ to the rest of the world.

Protectionist; open

Open; closed

Closed; open

Open; protectionist

The gains from trade that accrue to a country are the __________.

The benefits the country derives from trade

Resources the country derives from trade

Imports that come into the country

Receipts it gets from trading.

The following are all sources of gains from trade except;

The natural resources that countries possess vary

Cost advantages that emerge from specialisation in production

Enacting trade barriers to protect domestic producers

International competition drives economic growth due to increased pace of technological change

Country A has an absolute advantage over country B in the production of pineapples if __________

Country A has more productive workers than country B

Country A can produce more pineapples than country B with the same amount of resources as country B.

Country A uses better technology than country B in producing pineapples

Country A has a larger share of the pineapple market than country B

If the opportunity cost of producing a commodity is the same for country A and B, then none of the countries has __________ over the other

power

Advantage

Absolute advantage

Comparative advantage

When the terms of trade for a country fall, it means __________

The country's exports have lost value

Prices of the country's exports are falling

The country will require more exports to purchase the amount of imports as before

The country's exports are reducing in quantity

The argument that a country should export more and restrict imports in order to improve the quality of life of its people is weak because ___________

People's lives are improved by what they consume but exports are consumed by foreigners

Exports receipts are often lower than import payments

Exports are susceptible to trade wars

None of the above

The import quota is an example of a _______

Non-tariff barrier

Tariff

VAT

Terms of trade

The main risk associated with one country levying trade barriers against another is _________.

It increases xenophobia

It is always a catalyst for military conflict

It can trigger a series of retaliatory measures in the form of higher trade barriers against each other

It automatically causes a global recession

When a free trade agreement between countries A and B causes country B to substitute country C's exports for country A, _________has occurred.

Trade diversion

Trade creation

Trade surplus

Comparative advantage

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