If a country exports the good that it can produce at a low opportunity cost and imports those goods that it would otherwise produce at a high opportunity cost, we say that such trade is based on:
the theory of absolute advantage.
the arbitrage pricing theory.
theory of factor endowments.
the theory of comparative advantage.
Suppose that under autarky, wheat costs 5 dollar per bushel in the U.S. and 9 dollar per bushel in the Rest of the World. After the opening of free trade between the U.S. and the Rest of the World at a world price of $6 per bushel:
neither the U.S. nor the Rest of the World gain from trade.
both countries gain from trade, but the U.S. gains more than the Rest of the World.
both countries gain from trade, but the Rest of the World gains more than the U.S.
the net change in national welfare in the U.S. is zero but the Rest of the World gains.
Which of the following can help explain the rise of intra-industry trade?
Recent recessions and increase in the price of oil have led to lower national income levels.
The demand for product variety has increased substantially over time.
Countries widely vary in terms of their resource endowments.
The developed nations have recently implemented more conservative fiscal policies.
Which of the following features does a common market not have?
Common set of external tariffs
Free trade among its members
Harmonization of all economic policies
Free movement of factors of production
The net loss from trade diversion for a country A that is forming a trade union with country B is likely to be smaller if:
country A’s supply curve is very steep.
country A’s tariff rate on the product is higher.
the good can be produced at relatively lower cost in B than in the outside world.
B’s export price is closer to the tariff-inclusive price for imports from countries outside the trade union.
Under a floating exchange rate system, the dollar per euro ($/€) exchange rate rises when:
The U.S. trade deficit with the euro-area countries increases.
European demand for U.S. products increases.
The U.S. government raises personal income tax rates.
The inflation rate in the U.S. is much lower than the inflation rate in the euro-area.
Suppose the average price of a book in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is 1 dollar per 100 yen, the purchasing power parity model of exchange rate determination suggests that:
the yen is overvalued.
the yen value is about correct.
the yen is undervalued.
the dollar will depreciate against the yen.
If a country with a relatively high inflation rate maintains a pegged exchange rate against the currency of a relatively low inflation country:
its currency will depreciate.
its exports will become more competitive in international market.
its currency will sell at a discount.
its exports will become less competitive in the international market.
A country’s balance of payments records:
the prices that a country pays for its imports and the prices that the country receives for its imports.
the value of transactions between that country’s residents and residents of the rest of the world during a period of time.
capital gains and losses on a country’s international assets.
the value of a country’s holdings of foreign assets, minus the value of foreign holdings of the country’s assets.
| Question | Answer |
| 1 | 4 |
| 2 | 3 |
| 3 | 2 |
| 4 | 3 |
| 5 | 3 |
| 6 | 1 |
| 7 | 1 |
| 8 | 4 |
| 9 | 2 |
International Business Environment Practice Exam - IB - GroningenWhich of the following is true for a linear production possibility curve?
The figure below shows the export supply (XS) and import demand (MD) curve for rice. P indicates price and Q indicates quantity. Which of the following statements is true at a price of P1?
Scenario 1
A small country imports computer chips. With free trade at a world price of 400 dollars, domestic production is 1 million chips and domestic consumption is 4.2 million chips. The country’s government now decides to impose a quota to limit computer chip imports to 2 million per year. With the import quota in place, the domestic price rises to $480 per chip and domestic production rises to 1.5 million chips per year.
Refer to Scenario 1. If the government auctions the import licenses competitively, the national well-being will _____ by _____.
One of the reasons that protectionists and government officials may favor using a quota instead of a tariff is:
The figure given above shows the market for DVD imports in a large country. MD and XS are the domestic demand for imports and export supply curves respectively. There is an import quota imposed on DVDs and the government auctions the import licenses competitively.
Refer to Figure 1. As a result of the quota being imposed on DVD imports by this country, the exporting country will in terms of net welfare:
Refer to Figure 1. As a result of the quota being imposed on DVD imports by this country, the importing
country
International Business Environment Practice Exam Questions - IB - GroningenIf a country exports the good that it can produce at a low opportunity cost and imports those goods that it would otherwise produce at a high opportunity cost, we say that such trade is based on:
the theory of absolute advantage.
the arbitrage pricing theory.
theory of factor endowments.
the theory of comparative advantage.
Suppose that under autarky, wheat costs 5 dollar per bushel in the U.S. and 9 dollar per bushel in the Rest of the World. After the opening of free trade between the U.S. and the Rest of the World at a world price of $6 per bushel:
neither the U.S. nor the Rest of the World gain from trade.
both countries gain from trade, but the U.S. gains more than the Rest of the World.
both countries gain from trade, but the Rest of the World gains more than the U.S.
the net change in national welfare in the U.S. is zero but the Rest of the World gains.
Which of the following can help explain the rise of intra-industry trade?
Recent recessions and increase in the price of oil have led to lower national income levels.
The demand for product variety has increased substantially over time.
Countries widely vary in terms of their resource endowments.
The developed nations have recently implemented more conservative fiscal policies.
Which of the following features does a common market not have?
Common set of external tariffs
Free trade among its members
Harmonization of all economic policies
Free movement of factors of production
The net loss from trade diversion for a country A that is forming a trade union with country B is likely to be smaller if:
country A’s supply curve is very steep.
country A’s tariff rate on the product is higher.
the good can be produced at relatively lower cost in B than in the outside world.
B’s export price is closer to the tariff-inclusive price for imports from countries outside the trade union.
Under a floating exchange rate system, the dollar per euro ($/€) exchange rate rises when:
The U.S. trade deficit with the euro-area countries increases.
European demand for U.S. products increases.
The U.S. government raises personal income tax rates.
The inflation rate in the U.S. is much lower than the inflation rate in the euro-area.
Suppose the average price of a book in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is 1 dollar per 100 yen, the purchasing power parity model of
.....read more International Business Environment Practice Exam Questions - IB - GroningenIf a country exports the good that it can produce at a low opportunity cost and imports those goods that it would otherwise produce at a high opportunity cost, we say that such trade is based on:
the theory of absolute advantage.
the arbitrage pricing theory.
theory of factor endowments.
the theory of comparative advantage.
Suppose that under autarky, wheat costs 5 dollar per bushel in the U.S. and 9 dollar per bushel in the Rest of the World. After the opening of free trade between the U.S. and the Rest of the World at a world price of $6 per bushel:
neither the U.S. nor the Rest of the World gain from trade.
both countries gain from trade, but the U.S. gains more than the Rest of the World.
both countries gain from trade, but the Rest of the World gains more than the U.S.
the net change in national welfare in the U.S. is zero but the Rest of the World gains.
Which of the following can help explain the rise of intra-industry trade?
Recent recessions and increase in the price of oil have led to lower national income levels.
The demand for product variety has increased substantially over time.
Countries widely vary in terms of their resource endowments.
The developed nations have recently implemented more conservative fiscal policies.
Which of the following features does a common market not have?
Common set of external tariffs
Free trade among its members
Harmonization of all economic policies
Free movement of factors of production
The net loss from trade diversion for a country A that is forming a trade union with country B is likely to be smaller if:
country A’s supply curve is very steep.
country A’s tariff rate on the product is higher.
the good can be produced at relatively lower cost in B than in the outside world.
B’s export price is closer to the tariff-inclusive price for imports from countries outside the trade union.
Under a floating exchange rate system, the dollar per euro ($/€) exchange rate rises when:
The U.S. trade deficit with the euro-area countries increases.
European demand for U.S. products increases.
The U.S. government raises personal income tax rates.
The inflation rate in the U.S. is much lower than the inflation rate in the euro-area.
Suppose the average price of a book in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is 1 dollar per 100 yen, the purchasing power parity model of
.....read more International Business Environment Practice Exam - IB - GroningenWhich of the following is true for a linear production possibility curve?
The figure below shows the export supply (XS) and import demand (MD) curve for rice. P indicates price and Q indicates quantity. Which of the following statements is true at a price of P1?
Scenario 1
A small country imports computer chips. With free trade at a world price of 400 dollars, domestic production is 1 million chips and domestic consumption is 4.2 million chips. The country’s government now decides to impose a quota to limit computer chip imports to 2 million per year. With the import quota in place, the domestic price rises to $480 per chip and domestic production rises to 1.5 million chips per year.
Refer to Scenario 1. If the government auctions the import licenses competitively, the national well-being will _____ by _____.
One of the reasons that protectionists and government officials may favor using a quota instead of a tariff is:
The figure given above shows the market for DVD imports in a large country. MD and XS are the domestic demand for imports and export supply curves respectively. There is an import quota imposed on DVDs and the government auctions the import licenses competitively.
Refer to Figure 1. As a result of the quota being imposed on DVD imports by this country, the exporting country will in terms of net welfare:
Refer to Figure 1. As a result of the quota being imposed on DVD imports by this country, the importing
country
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