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Exam 14: Globalisation and International Trade

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Question 21

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It costs a computer manufacturer $2000 to produce a personal computer. This manufacturer sells these computers abroad for $1800. This is an example of:

A) dumping
B) a negative tariff
C) export subsidy
D) a trade- related economy of scale

E) All of the above
F) B) and D)

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Question 22

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Suppose the North American Free Trade Agreement (NAFTA) results in Canada and Mexico replacing low- cost beef produced in Australia with high- cost beef produced in the United States. This is an example of:

A) regional policy
B) trade creation
C) trade diversion
D) the common agricultural policy

E) C) and D)
F) B) and C)

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Question 23

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Discuss the merits of the argument that buying cheap foreign imports exploits foreign workers.

For any pair of countries, there is only a single exchange ratio that can lead to both countries realising the gains from specialisation and comparative advantage.

How do the terms of trade facilitate the realisation of the gains from specialisation and comparative advantage?

Which of the following is a FALSE statement about protection?

Which of the following preferential trading agreements is an example of a common market?

A rise in a country's terms of trade means that the country will now need to sell more exports to purchase the same quantity of imports.

If two countries engage in trade with one another, what determines which country will gain the most from trade?

The United States placed a limit on the amount of steel that can be imported into the United States. This is an example of:

Trade barriers prevent a nation from reaping the benefits of specialisation, lead to relatively inefficient production techniques, and mean consumers pay higher prices for protected products than they would otherwise pay.

The advantage enjoyed by one country over another, when it has a lower opportunity cost in producing a product is:

Australia is isolated in the world economy because it is not a member of a trading block and has no free- trade agreements with other nations.

Strategic trade theory supports the protection of all industries until they are able to compete successfully with imported goods.

Members of customs unions take a common approach when applying external tariffs to non- member countries.

The impact of the US credit crisis in 2007/08 on global markets illustrates the degree of integration between economies around the world.

Correctly complete the following statements from the options below. (a) A tax that is levied on imports is a: (b) Money given by the government to domestic industries to give them a price advantage is a: (c) A limit placed on the number of imports is a: (i) quota. (ii) subsidy. (iii) tariff.

According to the theory of comparative advantage, trade between two countries:

Distinguish between the following three types of preferential trading arrangement; a free trade area; a customs union and a perfect common market.

Nations which specialise in the production of commodities sold in international markets are very vulnerable to fluctuations in the global economy.