Q1 - Texas Tech University



Q1. According to mercantilism should ______ more than they _______.

A. Export, Import

B. Import, Export

C. Buy, Sell

D. Sell, Buy

Q2. Running a favorable trade balance of trade is ____ beneficial.

A. Always

B. Never

C. Not necessarily

D. None of the above

Q3. According to Adam Smith, a country’s wealth is based on its available _____ and _____ rather than _______.

A. Goods, Services, Silver

B. Goods, Services, Gold

C. Goods, Services, Bronze

D. Money, Agriculture, Gold

Q4. Natural advantage considers climate, natural resources, and _____ availability.

A. funds

B. government

C. labor force

D. economic

Q5. Free trade will bring?

A. Specialization

B. Greater efficiency

C. Higher Global Output

D. All of the above

Answers:

1) A

2) C

3) B

4) C

5) D

Chapter 6 Questions

1) Free trade brings all that, except:

a) Specialization

b) Greater efficiency

c) Comparative advantage for the home country

d) Higher global output

2) Adam Smith developed the:

a) Theory of Absolute Advantage

b) Theory of Comparative Advantage

c) Theory of Partial Advantage

d) Theory of Acquired Advantage

3) Considering comparative and absolute advantage:

a) There are advantages to trade even though one country may have absolute advantage in production of all products.

b) United States can produce 2.5 times as much wheat as Costa Rica but only twice as much coffee. Costa Rica should consider buying both products since the US is more efficient.

c) Considering (b), the US should sell more coffee than wheat in order to have an absolute advantage.

d) A country should give up the more efficient output in order to have an absolute advantage.

4) Factor mobility through foreign investment often simulates trade because of all these, except:

a) The need for components

b) The parent’s ability to sell complementary products

c) The need for equipment for subsidiaries

d) Cheaper prices in the home country

5) What is the most profitable market in Russia?

a) textile

b) food and drugs

c) petroleum

d) telecommunications

Answers:

1) C

2) A

3) A

4) D

5) C

1. According to the book, who developed the idea of Absolute Advantage?

a. Adam Smith

b. Max Weber

c. Alex Smith

d. Gregor Josovitch

2. Natural advantage considers:

a. climate

b. natural resources

c. labor availability

d. all of the above

3. Nontradable goods are:

a. goods that cannot be traded

b. products and services that are seldom practical to export

c. similar to raw materials

d. goods that the majority of countries are not interested in

4. Trading partners are affected by:

a. distance

b. Cultural similarity

c. Relations between countries

d. All of the above

5. What is the largest Oil Company in Russia according to the case study\

a. Petroven

b. BP

c. LUKoil

d. OPEC

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