Answer Happy

INTERNATIONAL TRADE AND BALANCE OF PAYMENT SECTION A (TRUE/ FALSE/MULTIPLE-CHOICE QUESTIONS) 1. The law of comparative advantage indicates that mutually beneficial international trade can take place only when a country can produce more of some product than other nations can. T/F 2. Country X has a comparative advantage in the production of a product compared to Country Y when it has the lowest domestic opportunity cost. T/F 3. The rate at which nations will exchange goods and services is known as the terms of trade. T/F Given the following production possibilities schedule, answer the following questions 4 to 6. Trucks (units) Wheat (units) 30 1 Country Hallow Willow 10 1 4. Willow has the absolute advantage in producing trucks. 5. Hallow has a comparative advantage in producing wheat. T/F 6. The terms of trade will be between 1 unit and 3 units of wheat for a unit of the truck. T/F T/F 7. The specification of the maximum amounts of commodities which may be imported into a country in any period of time is a tariff. T/F 8. A key difference between tariffs and quotas is that the government receives revenue with tariffs. T/F 9. A tariff on a product that is imported by a nation will result in a decrease in supply and an increase in price. T/F 10. Dumping is the sale of a product in a foreign market at a price below its domestic price or cost of production. T/F