Global Economy and Trade Quiz

What is the main reason why people or countries trade with each other?

• To reduce their dependence on other countries

• To limit the production of goods and services

• To increase their domestic production

• To enjoy a wider variety of goods and services

What is the term used to describe the difference between a country's total exports and total imports?

• Net exports

• Trade balance

• International trade gap

• Export-import differential

What is the concept that allows countries to specialize in the production of goods and services they can make at a lower opportunity cost?

• Comparative advantage

• Trade advantage

• Absolute advantage

• Specialization advantage

Which country has an absolute advantage in the production of copper wire according to the given example?

• India

• China

• Mexico

• United States

What does the principle of comparative advantage help us understand about trade?

• Countries should specialize in the production of goods and services they can make at a lower opportunity cost

• Countries should limit their trade with other nations

• Countries should only import goods and services

• Countries should produce everything domestically

What is the value of the next-best alternative when a decision is made called?

• Specialization cost

• Importance value

• Trade value

• Opportunity cost

What does trade based on comparative advantage allow countries to do?

• Buy a narrower variety of goods at higher prices

• Produce everything domestically

• Buy a wider variety of goods at lower prices

• Limit their production to fewer goods and services

What is the main reason for the United States currently importing more than it exports?

• Lack of domestic production

• Higher demand for imported goods and services

• Lower cost of domestic production

• Government regulations on exports

What is the term used to describe goods or services that are produced domestically but sold abroad?

• Foreign goods

• Domestic exports

• Exported goods

• Imports

What does trade allow us to purchase at a dramatically lower cost than if they were produced domestically?

• Limited quantity of goods

• A variety of things

• Goods and services with lower quality

• Goods and services with higher quality