Quiz on International Trade

What is the primary reason countries engage in international trade?

• To reduce the variety of goods available

• To limit economic growth

• To access resources they lack

• To increase production costs

What does absolute advantage refer to?

• Producing goods at a lower opportunity cost

• Producing more of a good than another country with the same resources

• Having a higher export price index

• Being able to trade without restrictions

Which country has a comparative advantage in cloth production?

• Neither country

• Country Y

• Country X

• Both countries

What is the opportunity cost of producing 1 unit of wheat in Country X?

• 1 unit of wheat

• 1 unit of cloth

• 2 units of cloth

• 0.5 units of cloth

What does the terms of trade indicate?

• The amount of goods produced domestically

• The total production of a country

• The ratio of export prices to import prices

• The level of economic growth

If Country A can produce 100 cars with 100 workers and Country B can produce 50 cars with the same number of workers, what advantage does Country A have?

• No advantage

• Absolute advantage

• Trade advantage

• Comparative advantage

What is one benefit of specialization in international trade?

• Decreased productivity

• Increased variety of goods

• Higher opportunity costs

• Limited market size

What happens when countries specialize and trade according to their comparative advantages?

• They consume within their production possibilities

• They can consume beyond their production possibilities

• They reduce their overall output

• They eliminate trade barriers

What is the formula for calculating terms of trade?

• Export Price Index - Import Price Index

• (Index of Export Prices / Index of Import Prices) * 100

• Export Price Index + Import Price Index

• (Index of Import Prices / Index of Export Prices) * 100

Which of the following is NOT a reason for international trade?

• Economic growth

• Specialization and efficiency

• Unequal distribution of resources

• Increased costs of production