Topic 3: Group Competition Quiz

Which of the following is not one of the policy tools to regulate trade in goods and services?

• Import quotas

• Tariffs

• Capital controls

• Trade related subsidies

Suppose the European Union puts a quota on imports of pineapples from Costa Rica. Which of the following groups is most likely to reap financial benefits from the imposition of the quota?

• The European Union’s pineapple producers

• The European Union’s government

• Costa Rica’s government

• The European Union’s consumers

The theory of factor-price equalisation states that:

• for both trading partners to benefit, factor prices should be equalised

• free trade tends to equalise returns on productive factors across countries

• returns on all of a country’s productive factors should be the same in the long run

• specialisation inhibits the equalisation of factor price

Economists say that a process that is highly automated is

• capital intensive

• labour intensive

• labour scarce

• capital abundant

The role of the World Trade Organisation (WTO) is to

• provide emergency assistance to countries in financial crisis

• issue project-specific loans to developing countries

• rule on trade disputes between countries

• Both B and C

A tariff can be defined as

• a tax paid by suppliers in the exporting country

• a subsidy paid to suppliers in the exporting country

• a subsidy paid to importers

• a tax paid by importers

According to the infant industry argument:

• Government should sometimes protect domestic firms from foreign competition until they can compete on their own.

• Tariffs may be justified to protect an industry until it becomes more competitive.

• Quotas are never justified in an international trade situation.

• Both A and B

According to the principle of comparative advantage:

• Each country should specialise in the good it can produce most efficiently compared with its trading partner

• Buyers should compare goods before signing a contract

• Wealthier countries have significant advantages compared to poorer countries

• Each country should produce at least some quantity of every important consumer good

Which of the following is not a potential drawback to specialisation and exchange in international markets?

• Loss of domestic food security

• Excessive dependence on another nation for crucial inputs

• Creation of common interests

• A “race to the bottom” in environmental standards

Which of the following is a disadvantage of import substitution policies?

• Decreased likelihood of lock-in

• Loss of potential gains from trade in the short run

• Loss of infant industry advantages

• Loss of long run comparative advantage