WGU C211 OA Global Economics Exam (2025 /
2026) Questions and Verified Answers, 100%
Guarantee Pass
1. Country A can produce 10 cars or 20 computers with one unit of resources.
Country B can produce 8 cars or 16 computers with one unit of resources.
According to the theory of comparative advantage:
A. Country A has an absolute advantage in both goods and should produce both.
B. No trade will occur since Country A is more efficient in both goods.
C. Both countries have the same opportunity cost ratios, making trade
unbeneficial.
D. Trade can still be beneficial if each country specializes based on lower
opportunity cost.
Rationale: - answer-; C. Both countries have the same opportunity cost ratios,
making trade unbeneficial. For Country A: 1 car = 2 computers (10 cars = 20
computers). For Country B: 1 car = 2 computers (8 cars = 16 computers). Since the
opportunity costs are identical (1:2 ratio for both), there is
,no comparative advantage for either country in either good, and thus no basis for
mutually beneficial trade based on this model. Country A has
an absolute advantage, but trade requires a difference in comparative advantage.
2. The Heckscher-Ohlin theory posits that international trade patterns are
primarily determined by:
A. Differences in labor productivity between nations.
B. The relative abundance of factors of production (land, labor, capital).
C. First-mover advantages and economies of scale.
D. Government policies and strategic trade interventions.
Rationale: - answer-; B. The relative abundance of factors of production (land,
labor, capital). The Heckscher-Ohlin model states that countries will export goods
that intensively use their relatively abundant and cheap factors of production,
and import goods that intensively use their relatively scarce and expensive
factors. This differs from the Ricardian model (A), which focuses on differences in
labor productivity (comparative advantage due to technology), and from New
Trade Theory (C), which incorporates economies of scale.
Trade Policy & Protectionism
3. A "voluntary export restraint" (VER) agreement between an importing and
exporting country typically results in:
A. Lower consumer prices in the importing country.
B. Increased quota rents for the government of the importing country.
C. Higher profits for producers in the exporting country who receive the restricted
export rights.
D. Increased market share for domestic producers in the importing country, with
no negative side effects.
Rationale: - answer-; C. Higher profits for producers in the exporting country
who receive the restricted export rights. A VER is a quota on trade imposed by
the exporting country at the request of the importing country. Because the
exporting country's government administers the quota, it typically distributes
licenses to its own firms. Those firms can then sell the scarce import slots at a
premium, capturing the "quota rents" (the economic profit from the artificial
scarcity). Consumers in the importing country face higher prices (A false). The
importing country's government does not collect revenue (B false—rents go to
,foreign firms). Domestic producers gain market share but consumers are harmed
(D false).
4. The primary economic justification for imposing an anti-dumping tariff is to:
A. Protect domestic industries from foreign competition at all costs.
B. Counteract predatory pricing by foreign firms selling below cost to drive out
competition.
C. Generate government revenue more efficiently than an income tax.
D. Retaliate against a trading partner's environmental standards.
Rationale: - answer-; B. Counteract predatory pricing by foreign firms selling
below cost to drive out competition. Under WTO rules, "dumping" is defined as
exporting a product at a price below its normal value (often the cost in the home
market or the cost of production). The economic argument for anti-dumping
duties is to prevent predatory pricing, where a foreign firm uses deep pockets to
sell at a loss, eliminate domestic competition, and then raise prices as a
monopoly. In practice, anti-dumping actions are often controversial and used for
protectionist purposes (like A), but the stated justification is B.
Foreign Direct Investment (FDI) & Global Strategy
5. According to Dunning's OLI (Eclectic) Paradigm, a firm will engage in Foreign
Direct Investment (FDI) rather than licensing or exporting when it possesses:
A. Ownership advantages, Location advantages, and Internalization advantages.
B. Only superior technology or brand name (Ownership advantage).
C. Access to cheap labor in the host country (Location advantage).
D. The desire to avoid trade barriers.
Rationale: - answer-; A. Ownership advantages, Location advantages, and
Internalization advantages. The OLI framework states that FDI occurs when a firm
has: 1) Ownership-specific advantages (intangible assets like patents, technology,
brand); 2) Location-specific advantages in the target country (cheap labor, natural
resources, market access); and 3) Internalization advantages (it is more profitable
to use these assets within the firm via FDI than to sell or license them to a foreign
firm via the market). All three conditions must be satisfied for FDI to be the
optimal entry mode.
, 6. A U.S. semiconductor firm builds a fabrication plant in Taiwan primarily to
access a highly skilled local engineering workforce and be part of a dense
industry cluster. This investment is best described as:
A. Market-seeking FDI.
B. Resource-seeking FDI.
C. Efficiency-seeking FDI.
D. Strategic asset-seeking FDI.
Rationale: - answer-; C. Efficiency-seeking FDI. Efficiency-seeking FDI aims to
rationalize operations by locating specific parts of the production process in the
most cost-effective or capable locations globally (part of a global supply chain).
Accessing a specialized, skilled workforce within an established industry cluster
(like Taiwan's semiconductor ecosystem) to improve the efficiency and quality of
a specific activity is a classic example. Market-seeking (A) targets local sales.
Resource-seeking (B) targets raw materials. Strategic asset-seeking (D) aims to
acquire assets (like brands or R&D) through acquisition, not building a plant.
Foreign Exchange & Global Financial Markets
7. If the U.S. dollar appreciates significantly against the euro, which of the
following is LIKELY to occur?
A. U.S. exports to the Eurozone become more competitive.
B. European vacations become more expensive for American tourists.
C. The U.S. trade deficit with the Eurozone will decrease.
D. Profits for U.S.-based multinational firms with European subsidiaries will
increase when converted to dollars.
Rationale: - answer-; B. European vacations become more expensive for
American tourists. A stronger dollar means 1 USD buys more euros. This makes
European goods, services, and travel cheaper for Americans. Let's check the
others: A is false—U.S. exports become more expensive for Europeans (less
competitive). C is false—cheaper imports and more expensive exports
typically widen the trade deficit. D is tricky—profits from European subsidiaries in
euros will convert to fewer dollars, reducing reported profits in USD (this is a
translation loss).
8. The International Fisher Effect suggests that:
A. Nominal interest rate differences between countries reflect expected changes
2026) Questions and Verified Answers, 100%
Guarantee Pass
1. Country A can produce 10 cars or 20 computers with one unit of resources.
Country B can produce 8 cars or 16 computers with one unit of resources.
According to the theory of comparative advantage:
A. Country A has an absolute advantage in both goods and should produce both.
B. No trade will occur since Country A is more efficient in both goods.
C. Both countries have the same opportunity cost ratios, making trade
unbeneficial.
D. Trade can still be beneficial if each country specializes based on lower
opportunity cost.
Rationale: - answer-; C. Both countries have the same opportunity cost ratios,
making trade unbeneficial. For Country A: 1 car = 2 computers (10 cars = 20
computers). For Country B: 1 car = 2 computers (8 cars = 16 computers). Since the
opportunity costs are identical (1:2 ratio for both), there is
,no comparative advantage for either country in either good, and thus no basis for
mutually beneficial trade based on this model. Country A has
an absolute advantage, but trade requires a difference in comparative advantage.
2. The Heckscher-Ohlin theory posits that international trade patterns are
primarily determined by:
A. Differences in labor productivity between nations.
B. The relative abundance of factors of production (land, labor, capital).
C. First-mover advantages and economies of scale.
D. Government policies and strategic trade interventions.
Rationale: - answer-; B. The relative abundance of factors of production (land,
labor, capital). The Heckscher-Ohlin model states that countries will export goods
that intensively use their relatively abundant and cheap factors of production,
and import goods that intensively use their relatively scarce and expensive
factors. This differs from the Ricardian model (A), which focuses on differences in
labor productivity (comparative advantage due to technology), and from New
Trade Theory (C), which incorporates economies of scale.
Trade Policy & Protectionism
3. A "voluntary export restraint" (VER) agreement between an importing and
exporting country typically results in:
A. Lower consumer prices in the importing country.
B. Increased quota rents for the government of the importing country.
C. Higher profits for producers in the exporting country who receive the restricted
export rights.
D. Increased market share for domestic producers in the importing country, with
no negative side effects.
Rationale: - answer-; C. Higher profits for producers in the exporting country
who receive the restricted export rights. A VER is a quota on trade imposed by
the exporting country at the request of the importing country. Because the
exporting country's government administers the quota, it typically distributes
licenses to its own firms. Those firms can then sell the scarce import slots at a
premium, capturing the "quota rents" (the economic profit from the artificial
scarcity). Consumers in the importing country face higher prices (A false). The
importing country's government does not collect revenue (B false—rents go to
,foreign firms). Domestic producers gain market share but consumers are harmed
(D false).
4. The primary economic justification for imposing an anti-dumping tariff is to:
A. Protect domestic industries from foreign competition at all costs.
B. Counteract predatory pricing by foreign firms selling below cost to drive out
competition.
C. Generate government revenue more efficiently than an income tax.
D. Retaliate against a trading partner's environmental standards.
Rationale: - answer-; B. Counteract predatory pricing by foreign firms selling
below cost to drive out competition. Under WTO rules, "dumping" is defined as
exporting a product at a price below its normal value (often the cost in the home
market or the cost of production). The economic argument for anti-dumping
duties is to prevent predatory pricing, where a foreign firm uses deep pockets to
sell at a loss, eliminate domestic competition, and then raise prices as a
monopoly. In practice, anti-dumping actions are often controversial and used for
protectionist purposes (like A), but the stated justification is B.
Foreign Direct Investment (FDI) & Global Strategy
5. According to Dunning's OLI (Eclectic) Paradigm, a firm will engage in Foreign
Direct Investment (FDI) rather than licensing or exporting when it possesses:
A. Ownership advantages, Location advantages, and Internalization advantages.
B. Only superior technology or brand name (Ownership advantage).
C. Access to cheap labor in the host country (Location advantage).
D. The desire to avoid trade barriers.
Rationale: - answer-; A. Ownership advantages, Location advantages, and
Internalization advantages. The OLI framework states that FDI occurs when a firm
has: 1) Ownership-specific advantages (intangible assets like patents, technology,
brand); 2) Location-specific advantages in the target country (cheap labor, natural
resources, market access); and 3) Internalization advantages (it is more profitable
to use these assets within the firm via FDI than to sell or license them to a foreign
firm via the market). All three conditions must be satisfied for FDI to be the
optimal entry mode.
, 6. A U.S. semiconductor firm builds a fabrication plant in Taiwan primarily to
access a highly skilled local engineering workforce and be part of a dense
industry cluster. This investment is best described as:
A. Market-seeking FDI.
B. Resource-seeking FDI.
C. Efficiency-seeking FDI.
D. Strategic asset-seeking FDI.
Rationale: - answer-; C. Efficiency-seeking FDI. Efficiency-seeking FDI aims to
rationalize operations by locating specific parts of the production process in the
most cost-effective or capable locations globally (part of a global supply chain).
Accessing a specialized, skilled workforce within an established industry cluster
(like Taiwan's semiconductor ecosystem) to improve the efficiency and quality of
a specific activity is a classic example. Market-seeking (A) targets local sales.
Resource-seeking (B) targets raw materials. Strategic asset-seeking (D) aims to
acquire assets (like brands or R&D) through acquisition, not building a plant.
Foreign Exchange & Global Financial Markets
7. If the U.S. dollar appreciates significantly against the euro, which of the
following is LIKELY to occur?
A. U.S. exports to the Eurozone become more competitive.
B. European vacations become more expensive for American tourists.
C. The U.S. trade deficit with the Eurozone will decrease.
D. Profits for U.S.-based multinational firms with European subsidiaries will
increase when converted to dollars.
Rationale: - answer-; B. European vacations become more expensive for
American tourists. A stronger dollar means 1 USD buys more euros. This makes
European goods, services, and travel cheaper for Americans. Let's check the
others: A is false—U.S. exports become more expensive for Europeans (less
competitive). C is false—cheaper imports and more expensive exports
typically widen the trade deficit. D is tricky—profits from European subsidiaries in
euros will convert to fewer dollars, reducing reported profits in USD (this is a
translation loss).
8. The International Fisher Effect suggests that:
A. Nominal interest rate differences between countries reflect expected changes
