International Trade Structures

What is the purpose of NAFTA?

• To increase trade restrictions between Mexico, the United States, and Canada

• To level out the economic imbalances between the three countries

• To decrease the production cost for most goods and services

• To limit the world's largest trading partnership with virtually no government restrictions

Answer explanation

The purpose of NAFTA is to level out economic imbalances between Mexico, the United States, and Canada.

What is the significance of net exports in the circular flow model of international trade?

• It decreases the value of exports relative to imports

• It only affects domestic production

• It influences and is influenced heavily by net exports

• It has no impact on the economy

Answer explanation

Net exports in the circular flow model of international trade have a significant impact on the economy, as they influence and are influenced heavily by net exports.

What are the determinants of net exports?

• National income levels, exchange rates, and government trade policy

• Protectionism, quotas, and advertising

• Consumer preferences, technological advances, and historical examples

• Changing prices, absolute advantage, and comparative advantage

Answer explanation

The determinants of net exports are national income levels, exchange rates, and government trade policy.

What is the goal of most market economies in terms of net exports?

• To maintain a trade deficit

• To maintain a trade surplus

• To increase the value of imports over exports

• To decrease the demand for foreign imports

Answer explanation

The goal of most market economies in terms of net exports is to maintain a trade surplus.

What is the role of international 'free-trade' according to supporters?

• To limit global standards of living

• To increase access to products and services which are otherwise unavailable

• To decrease total quantity of goods and services for all consumers

• To impose government restrictions on global trade

Answer explanation

Supporters of international free-trade believe that it increases access to products and services which are otherwise unavailable.

What is the absolute advantage of a country in international trade?

• The ability to produce more of any good or service from one 'unit of labor' than anyone else

• The ability to produce the same good at a lower opportunity cost than someone else

• The ability to produce something at a lower opportunity cost than someone else

• The ability to produce more of a product at the lowest production costs

Answer explanation

The absolute advantage of a country in international trade is the ability to produce more of any good or service from one 'unit of labor' than anyone else.

What is the comparative advantage of a country in international trade?

• The ability to produce more of a product at the lowest production costs

• The ability to produce something at a lower opportunity cost than someone else

• The ability to produce more of any good or service from one 'unit of labor' than anyone else

• The ability to produce the same good at a lower opportunity cost than someone else

Answer explanation

Comparative advantage is the ability to produce the same good at a lower opportunity cost than someone else.

What is the significance of technological advances in international trade?

• It has no impact on production costs

• It has drastically increased the production cost for most goods and services

• It has reduced the production cost for most goods and services

• It has decreased the demand for foreign imports

Answer explanation

Technological advances in international trade have reduced production costs for most goods and services.

What are the top three trading partners of America?

• Canada, Mexico, and China

• China, Japan, and Germany

• Canada, Mexico, and Japan

• China, Mexico, and Canada

Answer explanation

The top three trading partners of America are Canada, Mexico, and China. These countries have the highest trade volume with the United States.

What is the significance of historical examples in international trade?

• They have no impact on advancing international free-trade

• They have proven theories and lack of opposition evidence

• They have no practical examples to support opposition to free-trade

• They have increased government restrictions on global trade

Answer explanation

Historical examples in international trade are significant because they prove theories and lack opposition evidence, supporting the correct choice.