IB Final Comprehensive
Questions and Solutions
Graded A+
Which of the following is the best example of comparative advantage?
Meissen, Germany produces porcelain better than they manufacture vehicles.
A country with more textiles has a comparative advantage over a country with more wine.
France has multiple absolute advantages over England.
A coastal country is much more efficient in sea-food production than a land-bound country. -
Answer: Meissen, Germany produces porcelain better than they manufacture vehicles.
Which of the following is the best description of the theory of overlapping demand?
Countries should trade with countries whose demands do not overlap, because they will likely
be able to provide the necessary resources.
Countries whose residents have similar financial position, and therefore similar demand, should
trade with each other.
,Countries of all statuses should trade with each other, because overlapping demands do not
decrease the profitability of trade.
Countries with similar socioeconomic status have similar demands, therefore the countries who
supply those resources have the most trading power. - Answer: Countries whose residents have
similar financial position, and therefore similar demand, should trade with each other.
Which of the following statements is false?
Trade flows usually evolve from rich-country exports to rich-country imports.
Rivalry often aids the growth of world-class companies.
Comparative advantages often depend on location of production.
Trading is usually only beneficial to both parties if they each have a separate absolute
advantage. - Answer: Trading is usually only beneficial to both parties if they each have a
separate absolute advantage.
Comparative advantage is:
The ability to trade a good or service at a lower cost than a rival.
The ability to produce a specific good or service better than a rival.
The ability to produce a specific good or service at a lower opportunity cost than a rival.
,The ability to trade for a good or service that the country cannot produce. - Answer: The ability
to produce a specific good or service at a lower opportunity cost than a rival.
Which of the following is not a factor in Porter's diamond?
Factor endowments
Demand conditions
Related industries
Government intervention - Answer: Government intervention
A company stationed in Germany designed a new piece of technology and began to mass
produce and export it to many countries with varying economies. This is an illustration of which
of the following theories of trade?
Economies of Scale
Overlapping Demand
International Product Life Cycle
Comparative advantage - Answer: Economies of Scale
Which of the following would you NOT expect to happen in the maturity phase of the
international product life-cycle?
, Global sales decline.
Per-unit cost of production declines.
Production from the innovating company declines.
Production in developing countries declines. - Answer: Production in developing countries
declines.
All but which of the following is true of a nation's capital account?
It measures the transfer of capital to or from other countries
It indicates whether a country is producing more than it consumes
A trade deficit leads to a loss of capital
Capital includes monetary investments - Answer: It indicates whether a country is producing
more than it consumes
Which of the following is not an effect of global trade being generally processed in USD?
It pulls capital out of the US market.
It increases the cost of domestic goods and services.
Questions and Solutions
Graded A+
Which of the following is the best example of comparative advantage?
Meissen, Germany produces porcelain better than they manufacture vehicles.
A country with more textiles has a comparative advantage over a country with more wine.
France has multiple absolute advantages over England.
A coastal country is much more efficient in sea-food production than a land-bound country. -
Answer: Meissen, Germany produces porcelain better than they manufacture vehicles.
Which of the following is the best description of the theory of overlapping demand?
Countries should trade with countries whose demands do not overlap, because they will likely
be able to provide the necessary resources.
Countries whose residents have similar financial position, and therefore similar demand, should
trade with each other.
,Countries of all statuses should trade with each other, because overlapping demands do not
decrease the profitability of trade.
Countries with similar socioeconomic status have similar demands, therefore the countries who
supply those resources have the most trading power. - Answer: Countries whose residents have
similar financial position, and therefore similar demand, should trade with each other.
Which of the following statements is false?
Trade flows usually evolve from rich-country exports to rich-country imports.
Rivalry often aids the growth of world-class companies.
Comparative advantages often depend on location of production.
Trading is usually only beneficial to both parties if they each have a separate absolute
advantage. - Answer: Trading is usually only beneficial to both parties if they each have a
separate absolute advantage.
Comparative advantage is:
The ability to trade a good or service at a lower cost than a rival.
The ability to produce a specific good or service better than a rival.
The ability to produce a specific good or service at a lower opportunity cost than a rival.
,The ability to trade for a good or service that the country cannot produce. - Answer: The ability
to produce a specific good or service at a lower opportunity cost than a rival.
Which of the following is not a factor in Porter's diamond?
Factor endowments
Demand conditions
Related industries
Government intervention - Answer: Government intervention
A company stationed in Germany designed a new piece of technology and began to mass
produce and export it to many countries with varying economies. This is an illustration of which
of the following theories of trade?
Economies of Scale
Overlapping Demand
International Product Life Cycle
Comparative advantage - Answer: Economies of Scale
Which of the following would you NOT expect to happen in the maturity phase of the
international product life-cycle?
, Global sales decline.
Per-unit cost of production declines.
Production from the innovating company declines.
Production in developing countries declines. - Answer: Production in developing countries
declines.
All but which of the following is true of a nation's capital account?
It measures the transfer of capital to or from other countries
It indicates whether a country is producing more than it consumes
A trade deficit leads to a loss of capital
Capital includes monetary investments - Answer: It indicates whether a country is producing
more than it consumes
Which of the following is not an effect of global trade being generally processed in USD?
It pulls capital out of the US market.
It increases the cost of domestic goods and services.
