International Trade practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Economics

International Trade

Two countries open to trade with each other, and the international price of the traded good settles strictly between the two countries' autarky (no-trade) prices. The most likely outcome is that:

Economics

International Trade

A customs union most likely differs from a free trade area in that the customs union adds:

Economics

International Trade

In Country X, one worker can produce either 8 machine tools or 4 bolts of textiles per period. In Country Y, one worker can produce either 3 machine tools or 3 bolts of textiles per period. Based on comparative advantage, the most likely pattern of trade is that:

Economics

International Trade

A small country faces a fixed world price of 10 per unit for an imported good. Under free trade, domestic consumption is 100 units and domestic production is 40 units. A tariff of 2 per unit raises the domestic price to 12, reducing consumption to 90 units and raising domestic production to 60 units. The total deadweight loss from the tariff is closest to:

Economics

International Trade

A small country imposes a tariff on an imported good. The world price is unchanged. The most likely domestic welfare effect is:

Economics

International Trade

A quota and a tariff are calibrated to produce the same domestic price and import quantity. The key welfare difference is most likely that:

Economics

International Trade

A government pays a per-unit subsidy to domestic producers for each unit exported. For the exporting country, the most likely effect is:

Economics

International Trade

A regional agreement removes internal tariffs, adopts a common external tariff, allows labor and capital to move freely among members, and harmonizes some regulatory and fiscal policies. The agreement is best described as closest to a:

Economics

International Trade

A country opens to trade. Consumers gain from lower prices and greater variety, while workers and firms in import-competing industries suffer losses. The most accurate conclusion is that international trade:

Economics

International Trade

A tariff is imposed on imported steel. Domestic steel producers gain, but domestic automobile manufacturers use steel as a major input. The most complete analysis is that the tariff:

Economics

International Trade

A group of countries forms a common market mainly to increase scale economies, deepen competition, and permit labor and capital to move to more productive uses. The most appropriate expected benefit is:

Economics

International Trade

Comparative advantage is best described as the ability to produce a good at a lower:

Economics

International Trade

A free trade area is best described as an arrangement in which members:

Economics

International Trade

A quota differs from a tariff because a quota directly:

Economics

International Trade

Country A can produce either 10 units of wheat or 5 units of cloth per labor hour. Country B can produce either 6 units of wheat or 4 units of cloth per labor hour. Country B has a comparative advantage in:

Economics

International Trade

A small country imposes a tariff on an imported consumer good. The most likely result is:

Economics

International Trade

The progression from customs union to common market most likely adds:

Economics

International Trade

A country restricts imports using a quota rather than an equivalent tariff. Compared with the tariff, the quota is least likely to:

Economics

International Trade

A domestic industry argues for protection because it employs many workers. A CFA Level I analyst's most appropriate response is that protection: