Exercise Unit 6.1-6.2

A country says that it wishes to increase its trade protection policies. What might that involve?

• conservation of resources and taxes on external costs

• eliminating waste in the use of resources and grants to multinational companies

• increased self sufficiency and increased tariffs

• price controls and increased regulations on domestic monopoly industries

It has been suggested that all countries producing arms should ban the export of weapons and cut production in order to reduce the risk of war. What would happen if this occurred?

• The balance of payments on current account of countries exporting weapons would immediately improve.

• The price of existing weapons would fall.

• There would be a risk of structural unemployment in countries that are major producers of weapons.

• There would be no overall effect on the balance of payments as countries would produce their own weapons.

What is necessarily involved in international free trade?

• the absence of transport costs

• the gift of foreign aid from charities

• the supply of zero interest rate government loans

• the unrestricted exchange of goods and services

What might encourage international specialisation between countries?

• free trade

• inefficiencies in production

• labour immobility

• tariffs

The government of a developing country allows a multinational mining company to mine minerals in order to improve the standard of living of the local people. Which action by the multinational company (MNC) will not lead to an improvement in the standard of living of the local people?

• building roads to assist transport

• exporting mineral ore

• providing skills training

• returning profits overseas

A country has decided that it wants to increase free trade with its trading partners. Which measure would help it achieve this objective?

• a higher quota on imported cars

• a subsidy to domestic car producers

• an embargo on cars produced in other countries

• higher tariffs on imported goods

A country wishes to follow a policy of trade protection. Which action would it take?

• increase the level of import quotas

• reduce import tariffs

• remove exchange controls

• subsidise export producers

What would have the most severe restriction on the volume of international trade in steel?

• an embargo

• a licence system

• a quota

• a tariff

What encourages international specialisation?

• a foreign exchange shortage

• diseconomies of scale

• free trade

• quotas

A Japanese car manufacturer decided to produce its cars in a factory in Europe. What would not be a reason why they might have chosen to do this?

• cheaper wage costs in Europe

• the availability of raw materials

• to gain external economies from skilled labour in Europe

• to increase Japanese self-sufficiency