Question 1

Which of the following is a non-economic driver of globalization?
A) Comparative cost advantage.
B) Wars.
C) Trade barriers.
D) Technology and communications.

Accepted Answer

Technology and communications are non-economic drivers of globalization as they facilitate the exchange of information and connectivity across borders, enhancing global interactions beyond just economic factors.

Question 2

Which of the following is likely to improve a country's terms of trade?
A) The price of its imports rises relative to the price of its exports.
B) Its comparative advantage in the production of a good reduces.
C) The demand for its exports rises.
D) The cost of production of domestic goods rises.

Accepted Answer

The terms of trade improve when the price of a country's exports rises relative to the price of its imports. An increase in demand for its exports is likely to raise their prices, thereby improving the country's terms of trade.

Question 3

Which of the following statements is correct?
A) Globalization is a natural consequence of comparative advantage.
B) In the short-run, all individuals bene?t from international trade.
C) Two countries can never trade the same good.
D) Self-su?ciency is an easier way of increasing the real income levels of a

Accepted Answer

Globalization can be seen as a natural consequence of comparative advantage because countries engage in trade to benefit from their differences in production efficiencies. Comparative advantage suggests that even if one country is more efficient in producing all goods than another, both can still benefit from trade if they specialize in producing goods for which they have a comparative advantage. This specialization and subsequent trade can lead to increased efficiency and economic integration, which are key aspects of globalization.

Question 4

Which of the following is a reason for restricting trade?
A) To promote international peace.
B) To place quotas on imports.
C) To reduce international competitiveness.
D) To prevent environmental degradation.

Accepted Answer

The answer of Which of the following is a reason...

Question 5

Which of the following is an economic driver for globalization?
A) The convergence of cultures.
B) The media.
C) The law of comparative advantage.
D) Travel and tourism.

Accepted Answer

The law of comparative advantage explains how countries can gain from trade by specializing in the production of goods and services for which they have a lower opportunity cost, leading to increased efficiency and economic growth, which are key drivers of globalization.

Question 6

Suppose the opportunity costs of production of goods differ between two countries. Which of the following statements is true?
A) It will not be possible for either country to gain from trading with the other.
B) If each country specializes and trades with the other, there will be an increase in the
C) Each country should produce all the goods to promote self-suﬃciency.
D) Neither country will have a comparative advantage in the production in any of the goods.

Accepted Answer

When opportunity costs differ, each country can specialize in producing the goods for which it has a lower opportunity cost, leading to gains from trade for both countries.

Question 7

What does the terms of trade measure?
A) A trade agreement between two countries.
B) The opportunity costs of producing goods within a country.
C) The number of goods that will be traded between two countries.
D) The price ratio of exports to imports.

Accepted Answer

The terms of trade measure the price ratio of exports to imports, indicating how much of its imports a country can purchase per unit of exported goods.

Question 8

The nation of Chromia exports certain types of computer devices to Alvania and also imports other types of computer devices from Alvania. This is an example of _____.
A) two-way trade
B) domestic trade
C) inter-industry trade
D) restricted trade

Accepted Answer

This is an example of two-way trade, where two countries export and import similar types of goods, in this case, computer devices, to and from each other.

Question 9

Suppose country Zoravia can produce 1 unit of good X every 2 hours and 1 unit of good Y every 30 minutes. Another country Alaine needs an hour each to produce 1 unit of X and 1 unit of Y. Which of the following statements must be true?
A) Alaine is more productive in the production of both goods X and Y.
B) Zoravia has a lower opportunity cost in the production of good Y.
C) Alaine has to give up 4 units of Y to produce 1 unit of X.
D) Zoravia has no comparative advantage in the production of either good.

Accepted Answer

Zoravia has a lower opportunity cost in the production of good Y because it can produce 1 unit of Y in 30 minutes compared to 1 unit of X in 2 hours, meaning it gives up less of X to produce Y than Alaine, which has to give up 1 unit of X for every unit of Y due to the equal production times for both goods.

Question 10

If the country of Zebina has a comparative advantage in the production of wheat over the country of Almia, then:
A) the opportunity cost of producing wheat is higher in Zebina than in Almia.
B) the opportunity cost of producing wheat is lower in Zebina than in Almia.
C) neither Almia nor Zebina should specialize in the production of wheat.
D) Zebina will export all of its wheat to Almia.

Accepted Answer

The concept of comparative advantage suggests that a country has a comparative advantage in producing a good if it has a lower opportunity cost for that good compared to other countries. Therefore, if Zebina has a comparative advantage in wheat production, it means the opportunity cost of producing wheat is lower in Zebina than in Almia.

Question 11

Which of the following is likely to explain why India specializes in the production of textiles?
A) India has witnessed substantial GDP growth over the last decade.
B) Textiles is a labour-intensive industry and India has abundant cheap labour.
C) The opportunity cost of textile production in India is very high.
D) India is a mixed economy and industrial production as a percentage of GDP has grown

Accepted Answer

India specializes in the production of textiles primarily because it is a labor-intensive industry, and India has an abundant supply of cheap labor. This makes it cost-effective for the country to produce textiles compared to other countries with higher labor costs.

Question 12

If the nation of Alphania enjoys an increase in consumption as a result of specialization and trade, then it can be concluded that:
A) it has no trade barriers in any sector.
B) it has a comparative advantage in the production of all goods.
C) the country has a high level of inﬂation.
D) it has experienced the gains from trade.

Accepted Answer

Specialization and trade allow countries to focus on producing goods in which they have a comparative advantage, leading to more efficient production and increased overall consumption. This is known as experiencing the gains from trade.

Question 13

If the nation of Erbia can produce 1 laptop in 4 hours and 1 refrigerator in 8 hours, then the opportunity cost of producing one more refrigerator is:
A) 4 laptops.
B) 2 laptops.
C) 1 laptop.
D) 8 laptops.

Accepted Answer

The opportunity cost of producing one more refrigerator is the amount of the other good that must be given up to produce it. Since Erbia can produce 1 laptop in 4 hours and 1 refrigerator in 8 hours, producing one refrigerator costs the same amount of time as producing 2 laptops. Therefore, the opportunity cost of one refrigerator is 2 laptops.

Question 14

A tariff is:
A) a payment to domestic producers to help them compete in international markets.
B) a mechanism for setting an absolute level on the number of units of a good that can be
C) a tax on a product being exported.
D) a tax on a product being imported.

Accepted Answer

A tariff is a tax imposed by a government on goods and services imported from other countries, which increases the price of imported goods and services, making them less competitive compared to domestic products.

Question 15

The law of comparative advantage states that:
A) economies should specialize in the good that they are comparatively better at making.
B) economies should import goods that are comparatively cheaper to produce at home.
C) economies should produce goods with comparatively low-quality inputs to reduce costs.
D) economies should price products comparatively lower than the international price.

Accepted Answer

The law of comparative advantage, formulated by economist David Ricardo, suggests that economies should specialize in producing and exporting goods for which they have a lower opportunity cost compared to other economies. This principle supports the idea that even if one country is more efficient in producing all goods compared to another, both can benefit from trade if they specialize according to their comparative advantages.

Question 16

Suppose the USA can produce 1 car every 10 hours and 1 mobile phone every 4 hours. Also assume that Japan can produce 1 car every 5 hours and 1 mobile phone every hour. If the USA and Japan decide to trade, which of the following statements must be true?
A) The USA should specialize in the production of cars.
B) The USA is more productive than Japan in both goods.
C) Only the USA will beneﬁt from trade in this case.
D) The USA has a comparative advantage over Japan in the production of mobile phones.

Accepted Answer

The USA should specialize in the production of cars because it has a comparative advantage in car production, as it sacrifices fewer mobile phones per car compared to Japan.

Question 17

If there is a steady rise in the ratio of export to import prices for a country, it implies that:
A) the country is unable to fund its imports easily.
B) there has been an improvement in the terms of trade.
C) GDP growth has slowed down.
D) there has been a steady decline in the command GDP.

Accepted Answer

An improvement in the terms of trade occurs when the prices of a country's exports rise relative to the prices of its imports. This means the country can buy more imports for any given level of exports, indicating an improvement in its trade conditions.

Question 18

Two-way trade of cars between Germany and Japan is mainly a consequence of:
A) the law of comparative advantage.
B) consumers' demand for differentiated products.
C) protectionism, which has distorted world trade patterns.
D) increased ﬂow of FDI between the countries.

Accepted Answer

Consumers' demand for differentiated products leads to two-way trade, as consumers in each country desire different models and features offered by foreign manufacturers.

Question 19

Suppose that the nation of Rubium has a comparative disadvantage in the production of cocoa. Rubium should:
A) import cocoa.
B) produce cocoa for domestic consumption only.
C) produce cocoa for export only.
D) specialize in the production of cocoa in an attempt to increase productive eﬃciency.

Accepted Answer

Countries with a comparative disadvantage in producing a certain good should import that good from countries with a comparative advantage, allowing for more efficient global resource allocation.

Question 20

Suppose the nation of Lathania requires 10 hours to produce one washing machine and 4 hours to produce a mobile phone. The nation of Hafnia requires 3 hours to produce a washing machine and 8 hours to produce a mobile phone. It is beneﬁcial if:
A) Lathania imports washing machines from Hafnia.
B) Hafnia exports mobile phones to Lathania.
C) Lathania imposes tariffs on the import of washing machines.
D) Hafnia increases the domestic production of mobile phones.

Accepted Answer

The answer of Suppose the nation of Lathania requires 10...

Quiz 16: Globalization

Which of the following is a non-economic driver of globalization?

Which of the following is likely to improve a country's terms of trade?

Which of the following statements is correct?

Which of the following is a reason for restricting trade?

Which of the following is an economic driver for globalization?

Suppose the opportunity costs of production of goods differ between two countries. Which of the following statements is true?

What does the terms of trade measure?

The nation of Chromia exports certain types of computer devices to Alvania and also imports other types of computer devices from Alvania. This is an example of _____.

Suppose country Zoravia can produce 1 unit of good X every 2 hours and 1 unit of good Y every 30 minutes. Another country Alaine needs an hour each to produce 1 unit of X and 1 unit of Y. Which of the following statements must be true?

If the country of Zebina has a comparative advantage in the production of wheat over the country of Almia, then:

Which of the following is likely to explain why India specializes in the production of textiles?

If the nation of Alphania enjoys an increase in consumption as a result of specialization and trade, then it can be concluded that:

If the nation of Erbia can produce 1 laptop in 4 hours and 1 refrigerator in 8 hours, then the opportunity cost of producing one more refrigerator is:

A tariff is:

The law of comparative advantage states that:

Suppose the USA can produce 1 car every 10 hours and 1 mobile phone every 4 hours. Also assume that Japan can produce 1 car every 5 hours and 1 mobile phone every hour. If the USA and Japan decide to trade, which of the following statements must be true?

If there is a steady rise in the ratio of export to import prices for a country, it implies that:

Two-way trade of cars between Germany and Japan is mainly a consequence of:

Suppose that the nation of Rubium has a comparative disadvantage in the production of cocoa. Rubium should:

Suppose the nation of Lathania requires 10 hours to produce one washing machine and 4 hours to produce a mobile phone. The nation of Hafnia requires 3 hours to produce a washing machine and 8 hours to produce a mobile phone. It is beneﬁcial if: