International Trade: Theories, Trade Restrictions & Trade Policy, MCQs
The theory of comparative advantage was proposed by:
A) John Maynard Keynes
B) Adam Smith
C) David Ricardo
D) Karl Marx
Tariffs and quotas are examples of:
A) Trade liberalization
B) Trade restrictions
C) Trade agreements
D) Trade deficits
Export subsidies aim to:
A) Encourage imports
B) Discourage exports
C) Promote domestic production for export
D) Increase trade deficits
The World Trade Organization (WTO) aims to:
A) Promote free trade and resolve trade disputes
B) Impose trade restrictions on developing countries
C) Regulate international currency exchange rates
D) Restrict multinational corporations
Dumping refers to:
A) Exporting goods below cost to gain market share
B) Importing goods at a high cost to protect domestic industries
C) Regulating currency exchange rates
D) Establishing trade agreements
Which theory of international trade suggests that countries should specialize in producing goods where they have a comparative advantage?
A) Mercantilism
B) Absolute Advantage
C) Comparative Advantage
D) Factor Proportions Theory
According to the theory of Absolute Advantage, trade occurs because:
A) Countries have different production costs for the same goods
B) Countries have a natural advantage in producing certain goods
C) Countries prefer to be self-sufficient
D) None of the above
The Heckscher-Ohlin theory of international trade emphasizes the importance of:
A) Labor productivity differences between countries
B) Differences in factor endowments (land, labor, capital)
C) Export subsidies and tariffs
D) None of the above
Which trade theory suggests that countries should export goods that intensively use the factors of production that are locally abundant?
A) Absolute Advantage
B) Factor Proportions Theory
C) New Trade Theory
D) None of the above
Dumping refers to:
A) Selling goods in foreign markets at a lower price than in domestic markets
B) Government subsidies provided to domestic industries
C) Trade barriers imposed by importing countries
D) None of the above
Non-tariff barriers to trade include:
A) Quotas
B) Tariffs
C) Export subsidies
D) Voluntary export restraints
Which organization oversees international trade agreements and regulates trade among nations?
A) IMF (International Monetary Fund)
B) WTO (World Trade Organization)
C) World Bank
D) OPEC (Organization of the Petroleum Exporting Countries)
The Most Favored Nation (MFN) principle in trade means that:
A) All countries receive the same trade benefits as the most favored trading partner
B) Certain countries are given preferential treatment in trade agreements
C) Trade agreements are negotiated on a bilateral basis
D) None of the above
Which trade policy aims to protect domestic industries from foreign competition by imposing restrictions on imports?
A) Free trade policy
B) Export-oriented policy
C) Import substitution policy
D) Protectionism
A quota is a:
A) Limit on the amount of a specific good that can be imported
B) Tax levied on imported goods
C) Subsidy given to domestic producers
D) None of the above
Which of the following is an example of a trade barrier?
A) Export subsidy
B) Voluntary export restraint
C) Tariff
D) All of the above
The Infant Industry Argument suggests that:
A) Newly established industries should be protected from foreign competition until they become competitive
B) Free trade benefits only developed countries
C) Import tariffs should be eliminated to promote economic growth
D) None of the above
The principle of reciprocity in trade agreements refers to:
A) Equal treatment of all trading partners
B) Bilateral concessions made by trading partners
C) Unilateral trade liberalization
D) None of the above
Which trade policy encourages export-oriented production to boost economic growth?
A) Import substitution
B) Protectionism
C) Free trade
D) Export-led growth
The Smoot-Hawley Tariff Act of 1930:
A) Reduced tariffs on imports to stimulate international trade
B) Imposed high tariffs on imports, worsening the Great Depression
C) Led to the creation of the WTO
D) None of the above
What is the purpose of a trade embargo?
A) To promote trade between countries
B) To restrict or prohibit trade with a specific country
C) To encourage foreign investment
D) None of the above
Dumping is considered unfair trade practice when it:
A) Results in higher prices for consumers in the importing country
B) Reduces domestic employment in the exporting country
C) Involves selling goods below cost to gain market share
D) None of the above
Which trade policy aims to reduce trade barriers and promote free trade among participating countries?
A) Protectionism
B) Export-oriented policy
C) Regional Trade Agreement
D) Import substitution policy
The General Agreement on Tariffs and Trade (GATT) was replaced by the:
A) World Economic Forum
B) World Bank
C) World Trade Organization (WTO)
D) International Monetary Fund (IMF)
What is the primary function of the World Trade Organization (WTO)?
A) Providing financial aid to developing countries
B) Facilitating negotiations on trade agreements and resolving trade disputes
C) Promoting regional economic integration
D) None of the above
Which of the following is NOT a trade restriction?
A) Export subsidy
B) Quota
C) Tariff
D) Free trade agreement
The term “trade deficit” refers to:
A) Exports exceeding imports
B) Imports exceeding exports
C) Balance of trade being zero
D) None of the above
Which trade policy emphasizes reducing trade barriers, tariffs, and import quotas?
A) Import substitution policy
B) Protectionism
C) Free trade policy
D) Dumping
The principle of “comparative advantage” suggests that countries should specialize in producing goods:
A) Where they have an absolute advantage
B) That can be produced with the least amount of resources
C) That offer the highest profit margins
D) None of the above
The term “tariff” refers to:
A) A tax imposed on exports
B) A tax imposed on imports
C) A subsidy given to domestic producers
D) None of the above
The goal of the Most Favored Nation (MFN) status in trade agreements is to:
A) Give preferential treatment to certain countries
B) Promote equal trade benefits among all trading partners
C) Restrict trade with specific countries
D) None of the above
Which trade policy promotes the development of domestic industries by reducing dependence on imports?
A) Export-led growth
B) Import substitution policy
C) Protectionism
D) Dumping
What is the purpose of a voluntary export restraint (VER)?
A) To encourage exports from a specific country
B) To limit the quantity of goods exported to a specific country
C) To impose tariffs on imports
D) None of the above
The principle of “national treatment” in trade agreements means that:
A) Foreign goods are treated more favorably than domestic goods
B) Domestic and foreign goods are treated equally
C) Trade barriers are imposed on foreign goods
D) None of the above
Which trade theory suggests that firms can gain a competitive advantage through economies of scale and first-mover advantages?
A) Absolute Advantage
B) Comparative Advantage
C) New Trade Theory
D) Factor Proportions Theory
The concept of “dumping” is often associated with:
A) Export subsidies
B) Free trade agreements
C) Fair trade practices
D) None of the above
Which organization is responsible for setting international trade rules and resolving disputes among member countries?
A) World Bank
B) International Monetary Fund (IMF)
C) World Trade Organization (WTO)
D) United Nations (UN)
The “terms of trade” refer to:
A) The exchange rate between two currencies
B) The balance of trade between two countries
C) The ratio of export prices to import prices
D) None of the above
Which trade policy seeks to reduce reliance on foreign goods by encouraging domestic production?
A) Export-led growth
B) Import substitution policy
C) Protectionism
D) Dumping
The concept of “reciprocity” in trade negotiations refers to:
A) Bilateral concessions made by trading partners
B) Unilateral trade policies adopted by countries
C) Preferential treatment for certain industries
D) None of the above
