18 Questions
What determines whether a country will engage in export or import, according to the text?
The difference between the domestic market price (DMP) and the world market price (WMP).
What is the economic philosophy that advocates for a government to stimulate exports and restrict imports?
Mercantilism
What is the area 'D' in the diagram and table representing?
The increase in total surplus, which represents the gains from trade.
What is the main argument presented by Adam Smith in 'The Wealth of Nations'?
Free trade is the best policy for the nations of the world.
What is the term for the situation where a country exports more than it imports, resulting in an inflow of precious metal?
Trade surplus
What is the purpose of trade policy, according to the text?
To stimulate exports and restrict imports, according to mercantilists.
What is the concept where countries produce commodities in which they have an absolute advantage and import those in which they have an absolute disadvantage, leading to an increase in world output?
International specialization of factors in production
According to Ricardo, what should a nation specialize in producing and exporting if it has an absolute disadvantage in the production of all commodities with respect to another nation?
The commodity in which its absolute disadvantage is less
What is the term for the economic policy that advocates for minimizing government interference in domestic economy and international trade?
Laissez faire
What is the result of international trade when countries specialize in producing commodities in which they have an absolute advantage?
An increase in world output
What is the term for the increase in output resulting from international trade, which is shared by all trading nations?
Gains from trade
According to Adam Smith, what is the condition for maximizing the gains from trade?
Minimal government interference in domestic economy and international trade
What is the basis for international trade according to the Law of Comparative Advantage?
A nation's comparative advantage
What is the result of specialization according to comparative advantage?
An increase in world output
What is the purpose of tariffs, quotas, and non-tariff barriers?
To make imported goods less competitive than locally produced goods
What is the difference between a tariff and a quota?
A tariff is a tax on imports, while a quota is a limit on the amount of goods imported
What is the opportunity cost approach in the context of international trade?
A method to determine a nation's comparative advantage
Why is free trade not widely accepted as completely beneficial to all parties?
Due to the presence of trade barriers and restrictions
This quiz is about the concept of gains from trade in international economics, including the calculation of consumer surplus, producer surplus, and total surplus. It also covers the explanation of the diagram and table showing the increase in total surplus.
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