MCQs International Trade

The principle of comparative advantage shows:

• A that nations can benefit from specialisation and trade even if they do not have an absolute advantage.

• B that nations ought to operate as closed economies.

• C that nations ought to concentrate on the production of only one commodity that will give a surplus that can be traded.

• D that nations can only benefit from multilateral trade.

A country (A) has an absolute advantage over another country (B) in the production of coal if:

• A’s total output of coal is greater than B’s.

• A can produce more coal over a year.

• there is more demand for coal in A.

• A can produce coal at lower resource cost per unit than B.

The principle of comparative advantage shows that the benefits of trade rely on:

• resource costs.

• opportunity cost.

• marginal costs.

• transport costs.

Australia’s main trading partners are:

• A Russia and China.

• B New Zealand and the USA.

• C China and Japan.

International trade increases the standard of living of a country because it:

• increases the range of goods and services available.

• enables the government to increase its revenue through the collection of tariffs.

• creates employment in import-competing industries.

• overcomes high transportation costs.

The principle of comparative advantage is based on:

• the concept of opportunity cost.

• the money cost of producing a good.

• increasing opportunity costs.

• constant opportunity costs.

Countries will gain by concentrating on a limited range of goods because:

• producers discover new and more efficient techniques.

• their scale of operation will warrant mass production methods and the increased use of capital.

• they are more likely to improve the product itself as a result of improved skill and research.

• all of the above.

Australian exports are comprised mainly of:

• manufactured products.

• farming machinery and plant.

A nation will gain if:

• A exports increase and imports decrease.

• B exports decrease and imports increase.

• C both exports and imports increase.

• D both exports and imports decrease.

When a country exports:

• A domestic producers gain and domestic consumers gain.

• B domestic producers lose and domestic consumers gain.

• C domestic producers gain and domestic consumers lose.

• D domestic producers lose and domestic consumers lose.