Chapter 5 – Trading Internationally

A country needs absolute rather than comparative advantages to benefit from international trade
1. True
2. False
The infant industry argument suggests that young industries do not need tariff protection because they emerge in all countries at the same time.
1. True
2. False
Strategic trade policy is argued to be justified in industries characterised by high sunk costs, for example high costs of research and development.
1. True
2. False
Mercantilism is a modern trade theory developed in response to observed inequalities of trade during the oil crisis of the 1970s.
1. True
2. False
A trade embargo is a politically motivated restriction of imports from a particular country.
1. True
2. False
Voluntary export constraints are introduced by countries wishing to reduce the outflow of goods required at home, restricting for example the export of food products at times when the domestic cannot afford world market prices for essential food items.
1. True
2. False
In international trade theory, the term ‘deadweight loss’ is referring to
1. The loss to exporters due to the introduction of tariffs
2. The loss to importers due to the introduction of tariffs
3. The loss to consumers due to the introduction of tariffs
4. The net loss to society due to the introduction of tariffs
Anti-dumping duties are levied on importers who are engaging in the following practice deemed unfair in international trade:
1. Failing to source locally
2. Transfer pricing with the intention to minimize tax payments
3. Selling below costs with the intention to push competitors from the market
4. Selling at prices above competitive prices by exploiting monopolistic market positions
The factor endowment theory suggests that
1. Resources are the foundation of firm’s competitive advantages
2. National resource endowments are the foundation for comparative advantages in international trade
3. Many factors contribute to explaining the emergence of comparative advantages
4. Scarce resources are the foundation for comparative trade advantages
Which of the following is not an example of a non-tariff barrier (NTB)?
1. Infant industry tariff
2. Administrative procedures regarding customs clearance
3. Local content requirements
4. Idiosyncratic health and safety standards
The costs of pursuing one alternative in terms of the forgone revenues of pursuing another alternative are known as
1. Forgone costs
2. Sunk costs
3. Alternative costs
4. Opportunity costs
Which of the following is not considered a ‘modern’ trade theory?
1. Factor endowment theory
2. Product life cycle theory
3. National competitive advantage (‘diamond model’)
4. Strategic trade theory

Chapter 5 – Trading Internationally

Quiz