International Trade and Globalisation MCQs

What is a disadvantage of increasing international specialisation?

Consumers pay higher prices for goods and services reducing their welfare.
Domestic firms may be uncompetitive leading to structural unemployment.
Domestic firms may experience rising costs as they pay more for imports.
Resources may be used less efficiently as domestic firms face less competition.

A country specialises in the production of steel, toys and textiles. What is a disadvantage of specialisation for the country's workers?

They cannot afford to buy products from other countries.
They could become structurally unemployed if global demand changes.
They have to learn a variety of skills.
They have too much choice which wastes their time.

What is an advantage to a country of free trade?

greater international diversification of production
greater range of domestically produced goods
greater reliance on other countries
greater specialisation in the use of resources

The US imposed tariffs on cars and motorcycles from Germany. What is the effect of these tariffs?

decrease in inflation in the US
decrease in trade between the US and Germany
increase in profits of car and motorcycle producers from Germany
increase in standards of living in the US and in Germany

How might a multinational company (MNC) directly benefit a host country?

It creates local employment.
It depletes local natural resources.
It imports raw materials.
It receives tax concessions.

Malaysia and Indonesia specialise in the production of palm oil. What is a disadvantage of specialisation?

concentration of labour in the activity in which it is most productive
creation of jobs to meet world demand
reliance on trade with other countries for other goods
rising palm oil prices

Which method of protection always reduces the supply of an imported good to zero?

embargo
quota
subsidy
tariff

Economies have become increasingly linked through globalisation. What would discourage this?

creation of a single world market
direct foreign investment by multinational companies
expansion of trade in financial services
protectionist policies by trading groups

Globalisation is the process by which domestic firms become involved in international markets. What encourages globalisation?

controls on foreign exchange
immigration restrictions
increasing tariffs
widespread use of the internet

Why can specialisation cause economic growth?

Specialisation can allow a country to produce many different goods and services.
Specialisation can lead to a reduction in average costs of production.
Specialisation can mean that firms in a country will face diseconomies of scale.
Specialisation can reduce a country's need to depend on other economies.

What is thought to be a benefit of global free trade?

It increases the opportunity for domestic producers to specialise.
It increases the protection for domestic producers.
It reduces a country's reliance on other countries.
It reduces the transport costs involved in trading.

Which of the following could not be a reason for imposing tariffs on imported goods?

to encourage self sufficiency
to lower the general price level within the economy
to protect a growing domestic industry
to reduce a balance of trade deficit

How does a tariff differ from a quota?

A tariff is on exports, a quota is on imports.
A tariff is on the quantity of an import, a quota is on the price of an import.
A tariff raises government revenue, a quota raises no government revenue.
A tariff raises the price at which imports sell, a quota does not.

Which change will increase the demand for imports?

Consumer credit becomes more expensive.
Income tax rates increase.
The exchange rate appreciates
The government increases tariffs.

Which change will increase the quantity of a countryâ€™s exports?

Foreign governments raise tariff rates.
The countryâ€™s exchange rate depreciates.
The level of world income falls.
Transport costs become more expensive.

In September 2011 the Brazilian Government increased its tariff on imported Chinese cars. Which change might have increased the number of cars Brazil ...

a decrease in the quality of cars produced in Brazil
a decrease in the sales tax on cars produced in Brazil
an increase in the costs of producing cars in China
an increase in the value of China's currency

The citizens of a country which avoids international trade may benefit from

an increase in specialisation.
better political and cultural ties.
competitive pressure to improve the quality of goods.
more employment in their industries.

In 2012, Nokia, a mobile phone manufacturer, produced 18% of Finland's exports. Why might this be undesirable for Finland?

Foreign demand for mobile phone firms may grow continuously.
Nokia may introduce new technology which raises total costs by less than output.
There may be a reduction in trade restrictions on mobile phones.
There may be an industrial dispute at Nokia.

Which combination of factors would attract a multinational company (MNC) producing smartphones to operate in a low-income country?

high economic growth rate and supply of cheap labour
low corporation tax and competitive local market
limited supply of skilled workers and cheap land
strict employment laws and high import duties

Which policy is a form of protectionism?

a tax on emissions
a tax on imports
a tax on income
a tax on property

When does free trade occur?

when goods are exported with government subsidies
when goods are given as part of an aid programme
when goods are traded using barter
when goods face no import barriers

What is the best example of specialisation?

a diversified engineering company
a general repairs handyman
a self-sufficient, non-trading country
an old personâ€™s helper and care assistant

What policy would encourage greater international specialisation?

the promotion of industrial diversification
the protection of new businesses
the reduction of tariffs
the subsidising of service industries

Which government policy is most likely to increase the volume of exports?

devaluation
embargoes
quotas
tariffs

What is necessarily involved in international free trade?

the absence of transport costs
the gift of foreign aid from charities
the supply of zero interest rate government loans
the unrestricted exchange of goods and services

In recent years, the US has experienced a deficit on its overall current account of the balance of payments. What could have led to an increase in the...

increased competitiveness of goods made in the US
increased earnings by US investors in foreign companies
increased numbers of overseas visitors to the US
increased spending on US military bases abroad

In 2015, China was the world's largest exporter of manufactured goods and a major importer of oil and minerals. China devalued the yuan (renminbi...

China paid less in foreign currencies for imports.
China reduced its demand for oil and minerals.
China's exports became less competitive.
China's trading partners improved their balance of trade with China.

Which method of trade protection has the most predictable effect in controlling the level of imports?

quotas on imports
safety and quality regulations for imports
subsidies to domestic producers
tariffs on imports

What might encourage international specialisation between countries?

free trade
inefficiencies in production
labour immobility
tariffs

In 2015, Russia banned the imports of food, such as milk, from the European Union (EU). Which outcomes are most likely to happen as a result? milk mar...

excess demand fall rise
excess demand rise rise
excess supply fall fall
excess supply rise fall

In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible) despite exporting a greater number of goods than it imported. What...

The average price of its goods imported exceeded the average price of its goods exported.
The average value of its goods exported exceeded the average value of its goods imported.
The country had a deficit on its trade in services.
The country's government imposed tariffs on imports.

What usually decreases when there is a depreciation of a country's foreign exchange rate?

the level of national debt
the level of trade protection
the price of exports
the price of imports

A country imposes tariffs and quotas on imported goods. What will citizens of that country experience?

higher prices
higher unemployment
higher welfare
wider consumer choice

What is the most likely disadvantage of international specialisation?

decreased levels of global output
increased average production costs
increased productivity levels
overdependence on other economies

The US government decides to reduce the size of the quota on a good it buys from China. What is likely to happen?

The good will become cheaper in the US.
The US balance of trade will worsen.
The US government's revenue will decline.
There will be less of the good imported into the US.

What is a quota in international trade?

a government grant to encourage production
an administrative and technical barrier
a limit on the quantity of imports
a tax on imports

What is the most likely effect of a decrease in tariffs?

increased inflation rates
increased consumer choices
increased government revenue from tariffs
increased revenues of domestic firms

What is a disadvantage of increased specialisation by a country?

It becomes more reliant on imports to meet all its needs.
It reduces the potential for international trade.
It results in access to a greater variety of goods for consumers.
It results in lower costs for home produced goods.

Which protectionist measure would be most suitable for a government to use to support the growth in exports of an industry?

embargo
quota
subsidy
tariff

What is most likely to discourage international specialisation and trade for an economy?

decreasing labour supply
decreasing transport costs
increasing oil prices
increasing trade barriers

Many low-income countries rely on multinational companies (MNCs) to provide economic development. What is a disadvantage of this for the low-income c...

Local firms close because MNCs are more efficient.
New production techniques are introduced.
The balance of payments may improve.
The MNCs have to pay taxes on their profits.

A country says that it wishes to increase its trade protection policies. What might that involve?

conservation of resources and taxes on external costs
eliminating waste in the use of resources and the encouragement of multinational companies
increased self sufficiency and barriers to trade
price controls and increased regulations on domestic monopoly industries

A developing country's two major sources of income from international trade are fishing and tourism. If the country's exchange rate deprecia...

Imported goods would become cheaper for local people.
The country would definitely become poorer.
The price of fish sold as exports would become cheaper.
Tourists to the country would be discouraged by higher prices.

The Sri Lankan government decides to offer financial support to local firms. Of what is this an example?

a quota
a subsidy
a tariff
exchange control

Which change would be most likely to cause an increase in the demand for the Turkish Lira?

increased investments by Turkish firms in Italy
increased profits sent to France by French companies in Turkey
increased purchases of German chemicals by Turkish firms
increased speculation that the value of the Turkish Lira will rise in the future

The government of a developing country allows a multinational mining company to mine minerals in order to improve the standard of living of the local ...

building roads to assist transport
exporting mineral ore
providing skills training
returning profits overseas

Which method would both reduce imports and encourage exports?

embargoes on dangerous products
quotas on agricultural produce
subsidies on locally-produced electronics
tariffs on iron and steel products

What is a benefit of tariffs?

increased choice
increased government revenue
more competition
more trade

A country has decided that it wants to increase free trade with its trading partners. Which measure would help it achieve this objective?

a higher quota on imported cars
a subsidy to domestic car producers
an embargo on cars produced in other countries
higher tariffs on imported goods

A country wishes to follow a policy of trade protection. Which action would it take?

increase the level of import quotas
reduce import tariffs
remove exchange controls
subsidise export producers

What is most likely to result from an extension of specialisation in manufacturing?

for the consumer some prices will be reduced
for the country there will be less dependency on international trade
for the employee the work will become more varied
for the producer there will be less efficiency

What would reduce the volume of international trade in the world economy?

a German bank making a loan to a Nigerian company
a Japanese car manufacturer establishing a factory in the Czech Republic
the Canadian Government introducing quotas on Malaysian electronics products
the Swedish Government granting aid to Somalia

What is an advantage of international specialisation?

choice is limited
countries become over dependent on each other
resources are used more efficiently
transport costs are decreased

What is certain to encourage a higher level of international trade?

conservation of resources and unstable exchange rates
exploitation of resources and wider use of quotas
increased support for home industries and increased tariffs
more specialisation and falling transport costs

What encourages international specialisation?

a foreign exchange shortage
diseconomies of scale
free trade
quotas

A government removed the quota on goods imported into the country. What is the most likely result of this?

a decrease in demand for domestic production
a decrease in domestic unemployment
a decrease in exports
a decrease in the balance of trade deficit

A government may use customs barriers to restrict free trade. What is an economic reason for doing this?

to discourage the production of strategic goods
to improve the balance of trade
to increase a balance of payments deficit
to make imports cheaper

What is not an advantage of specialisation and division of labour?

A product is manufactured in separate stages, making it easier to use machinery.
Some workers become more dependent on other workers.
Workers complete a limited range of tasks and become more efficient at them.
Workers spend less time moving from one task to another.

What would be least likely to limit international trade?

border restrictions on movement
common regulations in different countries
complicated customs procedures
poor information on international markets

What is a benefit of a multinational company (MNC) to the host country?

A MNC may improve the reputation of its home country as a high-quality producer.
Exports by a MNC may result in an improved trade balance for the host country.
Production by a MNC may lead to higher levels of pollution in the host country.
Profits made by a MNC are sent back to its home country.

What is the most likely benefit for a low-income economy if it removes tariffs on imported goods and services?

more choice for domestic consumers
more employment in declining industries
more exports by domestic firms
more tax revenue from imports

Which policy would best enable a government to encourage greater specialisation in the use of its country's resources?

encouraging diversification in industry
protecting small businesses
reducing tariffs on imports into its country
subsidising job creation in rural areas

What might be a direct benefit to the individual worker of a specialised job?

Specialisation can enable the worker to become more skilled
Specialisation enables a better quality product to be produced
Specialisation enablles the firm to introduce more machinery
Specialisation makes better use of resources

When are countries most likely to specialise and trade with each other?

when the cost of transport between them is high
when there are large differences in their resource allocations
when they have access to the same technology
when they have high tariffs and other protective measures

What may be a cost to its home country when a multinational company (MNC) expands abroad?

Increased competition from the MNC may force firms in the host country to close.
Many jobs created by the MNC may be low-skilled.
The MNC's profits from the host country may be sent to its home country.
The MNC may cause job losses in its home country by moving production abroad

Which of the following increases specialisation?

A farmer decides to convert some of his farm buildings into holiday cottages for rent
A government decides that a country should be more self-sufficient in food production
A restaurant owner decides to have only vegetarian meals on his menu
A taxi driver decides to train for an additional license to drive a bus

Some countries protect their economies through barriers to free trade. What would be the result in such countries of this protection?

Competition will be reduced
Consumer choice will increase
Prices will fall
Unemployment will rise

Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that a reduction in tariffs would destroy the emerging ...

the declining industry argument
the infant industry argument
the strategic industry argument
the sunset industry argument

What is most likely to encourage international specialisation?

similarities in climate in different countries
the ability to produce products more cheaply than other countries
the discovery of oil in a country that had no oil before
very high international transport costs

Skin creams preventing sunburn made in the European Union (EU) are more effective than those made in the United States (US). US tourists stock up on t...

gain | gain
gain | lose
lose | gain
lose | lose

What is a disadvantage of trade protection of manufactured goods?

It can lead to retaliation from trading partners.
It encourages infant industries to grow.
It increases demand for domestic manufactured goods.
It reduces outflows of currencies to pay for imports.

A newspaper headline stated 'Free trade helps the world's poorest'. Why might this be correct?

Employment will be focused in hi-tech industries.
Environmental disasters will be avoided.
Free trade reduces competitiveness for domestic firms.
The cost of living is likely to go down with free trade.

A large amount of the agricultural products in a country were damaged by floods. What is likely to have happened to the price of agricultural products...

fall, fall
fall, rise
rise, fall
rise, rise

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International Trade and Globalisation MCQs