Question 1

The infant industry argument for protection is abused, but it is valid. In some cases new industries may well need protection from more powerful competitors.

Accepted Answer

A) True 
 B)False  TRUE

Question 2

Which of the following examples refers to licensing?

Accepted Answer

A)  Governments or local authorities permitting only national firms to operate domestic coach and bus services 
B)  Credit controls that favour domestic firms 
C)  Governments preferring to buy military equipment from domestic armaments manufacturers 
D)  Professions that only recognise their own national qualifications 
A)  Governments or local authorities permitting only national firms to operate domestic coach and bus services 
B)  Credit controls that favour domestic firms 
C)  Governments preferring to buy military equipment from domestic armaments manufacturers 
D)  Professions that only recognise their own national qualifications A

Question 3

What are some of the non- economic reasons for restricting international trade?

Accepted Answer

• A country may wish to maintain a degree of self- sufficiency in case trade is cut off.
• in times of war. This may apply particularly to the production of food and armaments.
• A country may decide not to trade with certain countries with which it disagrees politically.
• A country may wish to preserve traditional ways of life and prevent the importation of foreign values.
• A country may prefer to retain as diverse a society as possible, rather than one too narrowly based on certain industries. This is more likely to be a problem for smaller economies.

Question 4

Which of the following is not a problem with protection?

Accepted Answer

A)  It risks retaliation from other countries. 
B)  It may be a second- best solution. 
C)  It reduces the amount supplied by domestic producers. 
D)  It leads to a smaller world multiplier. 
A)  It risks retaliation from other countries. 
B)  It may be a second- best solution. 
C)  It reduces the amount supplied by domestic producers. 
D)  It leads to a smaller world multiplier.

Question 5

The case for free trade is based on the theory of absolute advantage.

Accepted Answer

A) True 
 B)False

Question 6

Explain how specialisation and trade benefit all trading partners, even those that may be inefficient producers in an absolute sense.

Accepted Answer

Trade allows countries to specialise in

Question 7

Which of the following statements is not true?

Accepted Answer

A)  Trade is beneficial because it allows everyone to have a higher standard of living. 
B)  Trade is beneficial because it allows consumption beyond the production possibility frontier. 
C)  Trade is beneficial because it allows more efficient production. 
D)  Trade is beneficial because it allows consumers to buy goods at cheaper prices. 
A)  Trade is beneficial because it allows everyone to have a higher standard of living. 
B)  Trade is beneficial because it allows consumption beyond the production possibility frontier. 
C)  Trade is beneficial because it allows more efficient production. 
D)  Trade is beneficial because it allows consumers to buy goods at cheaper prices.

Question 8

The following chart shows world growth in GDP and the real value of exports.
  Which of the following statements are correct?
(i) Export growth fluctuates more than GDP growth.
(ii) The average rate of growth in exports from 1955 to 2011 has been higher than the average rate of growth in GDP.
(iii) The years when the rate of growth in GDP is the higher than average tend to be the same years in which the rate of growth in exports is higher than average.

Accepted Answer

A)  (ii) and (iii) only 
B)  (i) and (iii) only 
C)  (i), (ii) and (iii) 
D)  (i) only 
A)  (ii) and (iii) only 
B)  (i) and (iii) only 
C)  (i), (ii) and (iii) 
D)  (i) only

Question 9

The WTO has no power to impose sanctions on countries breaking trade agreements.

Accepted Answer

A) True 
 B)False

Question 10

The efficiency loss from protection is the net loss in consumer, producer and government surplus.

Accepted Answer

A) True 
 B)False

Question 11

The following diagram shows a country which is a price- taker in world trade for a particular product. It initially has a tariff on the product as shown by the vertical difference between the two world supply curves.
    If the tariff were abolished, the net efficiency gain would be areas

Accepted Answer

A)  2 and 4 
B)  3 
C)  1 and 3 
D)  1, 2, 3 and 4 
A)  2 and 4 
B)  3 
C)  1 and 3 
D)  1, 2, 3 and 4

Question 12

Discuss some of the possible drawbacks of protectionism.

Accepted Answer

Protectionism obviously limits trade and

Question 13

What are some of the limitations of specialisation and trade?

Accepted Answer

As countries specialise and start tradin

Question 14

If the intellectual case for free trade, based on specialisation and comparative advantage, is so powerful, then why are protectionist policies so attractive to politicians in the US?

Accepted Answer

Protectionist policies are attractive to

Question 15

What is the role of the WTO?

Accepted Answer

The General Agreement on Tariffs and Tra

Question 16

Which of the following is not a rule for trade under GATT?

Accepted Answer

A)  Greater protection for developing countries 
B)  The most- favoured- nation clause 
C)  Reciprocity of tariff reductions between countries 
D)  Quotas on agricultural imports are prohibited 
A)  Greater protection for developing countries 
B)  The most- favoured- nation clause 
C)  Reciprocity of tariff reductions between countries 
D)  Quotas on agricultural imports are prohibited

Question 17

Which of the following is not a non- tariff barrier?

Accepted Answer

A)  Subsidies on domestic goods 
B)  Import levies on agricultural products 
C)  Administrative delays 
D)  Restrictions on investment by overseas companies 
A)  Subsidies on domestic goods 
B)  Import levies on agricultural products 
C)  Administrative delays 
D)  Restrictions on investment by overseas companies

Question 18

Dumping is where exports are sold at a price below marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

One of the main reasons for engaging in trade is to enjoy the benefits of economies scale.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements are true?
(i) The average annual growth in world output was higher than the growth in world exports.
(ii) Trade is expected to continue to increase as a percentage of world GDP.
(iii) The developed economy's share of world trade has been growing.
(iv) The most rapid growth in trade can be found in developing countries.
(v) With increased trade, countries have become more interdependent.
(vi) The BRICS have seen especially rapid growth in trade.

Accepted Answer

A)  (ii), (iv), (v) and (vi) 
B)  (i), (iii), (iv) and (vi) 
C)  (i), (iv) and (vi) 
D)  (ii), (iv) and (vi) 
E)  (iii), (iv) and (v) 
A)  (ii), (iv), (v) and (vi) 
B)  (i), (iii), (iv) and (vi) 
C)  (i), (iv) and (vi) 
D)  (ii), (iv) and (vi) 
E)  (iii), (iv) and (v)

Exam 24: International Trade

The infant industry argument for protection is abused, but it is valid. In some cases new industries may well need protection from more powerful competitors.

Which of the following examples refers to licensing?

What are some of the non- economic reasons for restricting international trade?

Which of the following is not a problem with protection?

The case for free trade is based on the theory of absolute advantage.

Explain how specialisation and trade benefit all trading partners, even those that may be inefficient producers in an absolute sense.

Which of the following statements is not true?

The WTO has no power to impose sanctions on countries breaking trade agreements.

The efficiency loss from protection is the net loss in consumer, producer and government surplus.

The following diagram shows a country which is a price- taker in world trade for a particular product. It initially has a tariff on the product as shown by the vertical difference between the two world supply curves. If the tariff were abolished, the net efficiency gain would be areas

Discuss some of the possible drawbacks of protectionism.

What are some of the limitations of specialisation and trade?

If the intellectual case for free trade, based on specialisation and comparative advantage, is so powerful, then why are protectionist policies so attractive to politicians in the US?

What is the role of the WTO?

Which of the following is not a rule for trade under GATT?

Which of the following is not a non- tariff barrier?

Dumping is where exports are sold at a price below marginal cost.

One of the main reasons for engaging in trade is to enjoy the benefits of economies scale.

The Business Environment and Business Economics

Economics and the World of Business

Business Organisations

The Working of Competitive Markets

Business in a Market Environment

Demand and the Consumer

Demand and the Firm

Products, Marketing and Advertising

Costs of Production

Revenue and Profit

Profit Maximisation Under Perfect Competition and Monopoly

Profit Maximisation Under Imperfect Competition

An Introduction to Business Strategy

Alternative Theories of the Firm

Growth Strategy

The Small-Firm Sector

Pricing Strategy

Labour Markets, Wages and Industrial Relations

Investment and the Employment of Capital

Reasons for Government Intervention in the Market

Government and the Firm

Government and the Market

Globalisation and Multinational Business

Trading Blocs

The Macroeconomic Environment of Business

The Balance of Payments and Exchange Rates

Banking, Money and Interest Rates

Business Activity, Employment and Inflation

Demand-Side Policy

Supply-Side Policy

International Economic Policy

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