WGU C211 GLOBAL BUSINESS CHP 2 QUESTIONS WITH VERIFIED ANSWERS &
RATIONALES (COMPLETE EXAM PREP MATERIAL)
What are the benefits of trade? - CORRECT ANSWERS-1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards
an especially advantageous or low import tariff established by a nation for all or some goods of certain
countries and not applied to the same goods of other countries - CORRECT ANSWERS-preferential
duties
an agreement where a large number of developed countries permit duty-free imports of a selected list of
products that originate from specific countries - CORRECT ANSWERS-Generalized System of
Preferences (GSP)
a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good
- CORRECT ANSWERS-Ad Volorem Tariff
a negative tariff or tax aimed at boosting exports - CORRECT ANSWERS-export subsidies
an agreement among two WTO countries in which any tariff concession granted by one member to any
other country will automatically be extended to all other countries of WTO - CORRECT ANSWERS-most
favored nation (MFN)
Managed trade aims to replace global market or economic forces with government actions to determine
trade outcomes
, Can only gain from trade if it has trade surplus.
More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus - CORRECT ANSWERS-Mercantilism
Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards - CORRECT ANSWERS-Absolute Advantage
Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be giving up other
opportunities (like corn). Brazil does coffee beans at little opportunity cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost - CORRECT ANSWERS-Competitive Advantage
Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what each country has to
work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage - CORRECT ANSWERS-H-O Theory (Heckscher-
Ohlin)
Follows the H-O Theory
RATIONALES (COMPLETE EXAM PREP MATERIAL)
What are the benefits of trade? - CORRECT ANSWERS-1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards
an especially advantageous or low import tariff established by a nation for all or some goods of certain
countries and not applied to the same goods of other countries - CORRECT ANSWERS-preferential
duties
an agreement where a large number of developed countries permit duty-free imports of a selected list of
products that originate from specific countries - CORRECT ANSWERS-Generalized System of
Preferences (GSP)
a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good
- CORRECT ANSWERS-Ad Volorem Tariff
a negative tariff or tax aimed at boosting exports - CORRECT ANSWERS-export subsidies
an agreement among two WTO countries in which any tariff concession granted by one member to any
other country will automatically be extended to all other countries of WTO - CORRECT ANSWERS-most
favored nation (MFN)
Managed trade aims to replace global market or economic forces with government actions to determine
trade outcomes
, Can only gain from trade if it has trade surplus.
More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus - CORRECT ANSWERS-Mercantilism
Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards - CORRECT ANSWERS-Absolute Advantage
Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be giving up other
opportunities (like corn). Brazil does coffee beans at little opportunity cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost - CORRECT ANSWERS-Competitive Advantage
Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what each country has to
work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage - CORRECT ANSWERS-H-O Theory (Heckscher-
Ohlin)
Follows the H-O Theory
