International Trade Revision Quiz

If Country China has absolute advantage in producing computers in comparison to Australia, this means, China can produce computers by using fewer resources than Australia.

• True

• False

Answer explanation

China having an absolute advantage in producing computers means it can produce them using fewer resources than Australia, making the statement true.

If Australia is able to produce wheat at a higher opportunity cost than NZ, Australia has comparative advantage in wheat. Lower opportunity costs lead to comparative advantage.

• True

• False

Answer explanation

The statement is false because lower opportunity costs actually lead to a comparative advantage, not higher opportunity costs.

International trade theory says countries should specialise in producing the products for which they have comparative advantage, and trade with other countries.

• True

• False

Answer explanation

Countries should specialize in producing products they have a comparative advantage in, as per international trade theory, hence the statement is true.

Specialisation involves a country producing the goods and services for which it has the lowest opportunity cost.

• True

• False

Answer explanation

Specialisation involves producing goods and services with the lowest opportunity cost, making the statement true.

Free trade refers to a policy whereby governments attempt to restrict imports from, or exports to, other countries.

• True

• False

Answer explanation

The statement is false because free trade actually involves reducing or eliminating barriers to trade, not restricting it.

An increase in international trade should lead to an increase in employment.

• True

• False

Answer explanation

An increase in international trade often leads to an increase in employment due to the creation of new job opportunities in various sectors like manufacturing, logistics, and services.

When a government allows unrestricted imports and exports to move between their country and others without restriction it is known as comparative advantage.

• True

• False

Answer explanation

The statement is false because unrestricted imports and exports are associated with absolute advantage, not comparative advantage.

A policy whereby governments attempt to restrict imports from, or exports to, other countries is known as protectionism.

• True

• False

Answer explanation

The correct answer is True because protectionism refers to the policy of restricting imports and exports between countries.

Imposing tariffs on imported goods is an example of a protectionist policy.

• True

• False

Answer explanation

Imposing tariffs on imported goods is a protectionist policy as it aims to protect domestic industries from foreign competition.

When a government wants to increase the level of imported goods entering the country, it would be likely to impose a quota.

• True

• False

Answer explanation

The correct answer is False because when a government wants to increase the level of imported goods, it would likely reduce or eliminate quotas to allow more goods to enter the country.