Ch.3: Doing Business in Global Markets — Quiz (Grade 12)

What is the term for buying products from another country?

• Exporting

• Importing

• Dumping

• Free trade

Which economist in the early 19th century suggested comparative advantage theory?

• Adam Smith

• Karl Marx

• David Ricardo

• John Keynes

What is free trade?

• Trade that costs nothing to conduct

• The movement of goods and services among nations without political or economic barriers

• Trade only between allied countries

• Government-subsidized exports

What is dumping in global trade?

• Disposing of damaged goods overseas

• Selling products in a foreign country at lower prices than in the producing country

• Importing goods below market value

• Abandoning a trade agreement

A country is said to have an absolute advantage when it:

• Has the lowest opportunity cost for producing a good

• Can produce a specific product more efficiently than all other countries

• Exports more than it imports

• Has no trade deficit

Why does comparative advantage theory support free trade?

• It encourages self-sufficiency in all nations

• It shows countries should produce what they make most effectively and trade for the rest, creating mutual benefits

• It prevents dumping in foreign markets

• It guarantees a trade surplus for all trading partners

Which of the following is a CON of global free trade?

• Increased productivity through specialization

• Greater access to foreign investment

• Domestic workers in manufacturing can lose jobs to low-wage global markets

• Innovation is stimulated by global competition

What does a favorable balance of trade (trade surplus) mean?

• Imports exceed exports

• The value of exports exceeds the value of imports

• The country has no trade deficit

• Foreign investment exceeds domestic investment

How does the balance of payments differ from the balance of trade?

• BOP only considers goods; BOT includes services

• BOT measures exports vs. imports; BOP also includes tourism, foreign aid, military spending, and investment flows

• BOP measures goods only; BOT includes all financial flows

• They are the same concept with different names

Why do nations trade with each other rather than becoming self-sufficient?

• It is legally required by international law

• No nation can produce all the products its people want; trade allows each country to produce what it does best

• Trade always results in a surplus for both nations

• Self-sufficiency is too technologically advanced