WGU C211 Global Economics for Managers
OA Exam ACTUAL EXAM 2026/2027 |
Complete Exam-Style Q&A | Verified Q&A |
Pass Guaranteed - A+ Graded
TABLE OF CONTENTS
Total Questions: 70
Passing Score: 90%
Section 1: International Trade Theories (Q1–Q12)
Section 2: Trade Policies & Restrictions (Q13–Q22)
Section 3: Foreign Direct Investment (Q23–Q32)
Section 4: Regional Economic Integration (Q33–Q40)
Section 5: Foreign Exchange Markets & Exchange Rates (Q41–Q52)
Section 6: Balance of Payments & International Monetary System (Q53–Q60)
Section 7: Economic Development & Emerging Markets (Q61–Q65)
Section 8: Political Economy & Globalization (Q66–Q70)
SECTION 1: INTERNATIONAL TRADE THEORIES (Q1–Q12)
Q1:
Country A can produce 1 ton of wheat using 2 hours of labor or 1 ton of steel using 4 hours of labor.
Country B can produce 1 ton of wheat using 3 hours of labor or 1 ton of steel using 6 hours of labor.
Based on Adam Smith’s theory of absolute advantage, which country should specialize in which good?
A. Country A has an absolute advantage in wheat; Country B has an absolute advantage in steel.
B. Country A has an absolute advantage in both wheat and steel; Country B should not trade.
C. Country A has an absolute advantage in both wheat and steel; Country B should specialize in wheat.
,[CORRECT]
D. Country B has an absolute advantage in both goods; Country A should specialize in steel.
Correct Answer: C
Rationale: Adam Smith’s absolute advantage theory states that a country has an absolute advantage
when it can produce a good using fewer resources than another country. Country A uses fewer labor
hours for both wheat (2 < 3) and steel (4 < 6), giving it an absolute advantage in both. However, Smith
still advocated for specialization based on absolute advantage and trade—Country B should specialize in
the good where its absolute disadvantage is smallest (wheat), as it is relatively more efficient there
compared to steel.
Q2:
Country X can produce 100 cars or 200 computers with its full labor force. Country Y can produce 80 cars
or 160 computers with its full labor force. According to David Ricardo’s theory of comparative
advantage, which statement is correct?
A. Country X has a comparative advantage in computers; Country Y has a comparative advantage in cars.
B. Country X has a comparative advantage in cars; Country Y has a comparative advantage in computers.
C. Neither country has a comparative advantage because their opportunity costs are identical.
[CORRECT]
D. Country Y has a comparative advantage in both goods because its production is lower.
Correct Answer: C
Rationale: Ricardo’s comparative advantage is determined by opportunity cost. In Country X, 1 car = 2
computers (200/100), and 1 computer = 0.5 cars. In Country Y, 1 car = 2 computers (160/80), and 1
computer = 0.5 cars. Since opportunity costs are identical in both countries, neither has a comparative
advantage in either good, and there is no basis for mutually beneficial trade under this model.
Q3:
A country is abundant in capital but scarce in labor. According to the Heckscher-Ohlin theory, which type
of good will this country tend to export?
A. Labor-intensive goods such as textiles and apparel.
B. Capital-intensive goods such as machinery and chemicals. [CORRECT]
C. Land-intensive goods such as agricultural products.
D. Technology-intensive goods requiring high R&D regardless of factor endowments.
Correct Answer: B
Rationale: The Heckscher-Ohlin (factor endowments) theory predicts that a country will export goods
that intensively use its abundant factors of production and import goods that intensively use its scarce
factors. A capital-abundant country will export capital-intensive goods like machinery and chemicals.
, Q4:
A U.S. pharmaceutical firm developed a new drug and initially manufactured it domestically. As the
product matured and competition increased, the firm began licensing production to foreign
manufacturers in India and Brazil. Which stage of Raymond Vernon’s product life cycle theory does this
describe?
A. New product stage
B. Mature product stage
C. Standardized product stage [CORRECT]
D. Decline stage
Correct Answer: C
Rationale: Vernon’s product life cycle theory describes three stages: (1) new product (innovation and
domestic production), (2) mature product (foreign demand grows, some exports), and (3) standardized
product (price competition dominates, production shifts to low-cost foreign locations via licensing or
FDI). The shift to licensing in India and Brazil reflects the standardized product stage.
Q5:
According to the new trade theory, why might a country dominate exports in a particular product (such
as commercial aircraft) even if another country could potentially produce it at a lower cost?
A. Because the first country has an absolute advantage in all manufacturing.
B. Because economies of scale and first-mover advantage create barriers to entry for later competitors.
[CORRECT]
C. Because the second country lacks the necessary natural resources.
D. Because comparative advantage is determined solely by labor productivity differences.
Correct Answer: B
Rationale: New trade theory, developed by Paul Krugman and others, emphasizes that economies of
scale and first-mover advantages can lead to trade patterns that are not explained by comparative
advantage alone. A country that first achieves large-scale production benefits from lower average costs,
making it difficult for later entrants to compete even if they have lower potential costs.
Q6:
A country has highly specialized and demanding domestic consumers, a strong network of domestic
suppliers in related industries, and intense rivalry among domestic firms. According to Michael Porter’s
diamond of national competitive advantage, which of these is NOT one of the four determinants?
A. Factor conditions
B. Demand conditions
OA Exam ACTUAL EXAM 2026/2027 |
Complete Exam-Style Q&A | Verified Q&A |
Pass Guaranteed - A+ Graded
TABLE OF CONTENTS
Total Questions: 70
Passing Score: 90%
Section 1: International Trade Theories (Q1–Q12)
Section 2: Trade Policies & Restrictions (Q13–Q22)
Section 3: Foreign Direct Investment (Q23–Q32)
Section 4: Regional Economic Integration (Q33–Q40)
Section 5: Foreign Exchange Markets & Exchange Rates (Q41–Q52)
Section 6: Balance of Payments & International Monetary System (Q53–Q60)
Section 7: Economic Development & Emerging Markets (Q61–Q65)
Section 8: Political Economy & Globalization (Q66–Q70)
SECTION 1: INTERNATIONAL TRADE THEORIES (Q1–Q12)
Q1:
Country A can produce 1 ton of wheat using 2 hours of labor or 1 ton of steel using 4 hours of labor.
Country B can produce 1 ton of wheat using 3 hours of labor or 1 ton of steel using 6 hours of labor.
Based on Adam Smith’s theory of absolute advantage, which country should specialize in which good?
A. Country A has an absolute advantage in wheat; Country B has an absolute advantage in steel.
B. Country A has an absolute advantage in both wheat and steel; Country B should not trade.
C. Country A has an absolute advantage in both wheat and steel; Country B should specialize in wheat.
,[CORRECT]
D. Country B has an absolute advantage in both goods; Country A should specialize in steel.
Correct Answer: C
Rationale: Adam Smith’s absolute advantage theory states that a country has an absolute advantage
when it can produce a good using fewer resources than another country. Country A uses fewer labor
hours for both wheat (2 < 3) and steel (4 < 6), giving it an absolute advantage in both. However, Smith
still advocated for specialization based on absolute advantage and trade—Country B should specialize in
the good where its absolute disadvantage is smallest (wheat), as it is relatively more efficient there
compared to steel.
Q2:
Country X can produce 100 cars or 200 computers with its full labor force. Country Y can produce 80 cars
or 160 computers with its full labor force. According to David Ricardo’s theory of comparative
advantage, which statement is correct?
A. Country X has a comparative advantage in computers; Country Y has a comparative advantage in cars.
B. Country X has a comparative advantage in cars; Country Y has a comparative advantage in computers.
C. Neither country has a comparative advantage because their opportunity costs are identical.
[CORRECT]
D. Country Y has a comparative advantage in both goods because its production is lower.
Correct Answer: C
Rationale: Ricardo’s comparative advantage is determined by opportunity cost. In Country X, 1 car = 2
computers (200/100), and 1 computer = 0.5 cars. In Country Y, 1 car = 2 computers (160/80), and 1
computer = 0.5 cars. Since opportunity costs are identical in both countries, neither has a comparative
advantage in either good, and there is no basis for mutually beneficial trade under this model.
Q3:
A country is abundant in capital but scarce in labor. According to the Heckscher-Ohlin theory, which type
of good will this country tend to export?
A. Labor-intensive goods such as textiles and apparel.
B. Capital-intensive goods such as machinery and chemicals. [CORRECT]
C. Land-intensive goods such as agricultural products.
D. Technology-intensive goods requiring high R&D regardless of factor endowments.
Correct Answer: B
Rationale: The Heckscher-Ohlin (factor endowments) theory predicts that a country will export goods
that intensively use its abundant factors of production and import goods that intensively use its scarce
factors. A capital-abundant country will export capital-intensive goods like machinery and chemicals.
, Q4:
A U.S. pharmaceutical firm developed a new drug and initially manufactured it domestically. As the
product matured and competition increased, the firm began licensing production to foreign
manufacturers in India and Brazil. Which stage of Raymond Vernon’s product life cycle theory does this
describe?
A. New product stage
B. Mature product stage
C. Standardized product stage [CORRECT]
D. Decline stage
Correct Answer: C
Rationale: Vernon’s product life cycle theory describes three stages: (1) new product (innovation and
domestic production), (2) mature product (foreign demand grows, some exports), and (3) standardized
product (price competition dominates, production shifts to low-cost foreign locations via licensing or
FDI). The shift to licensing in India and Brazil reflects the standardized product stage.
Q5:
According to the new trade theory, why might a country dominate exports in a particular product (such
as commercial aircraft) even if another country could potentially produce it at a lower cost?
A. Because the first country has an absolute advantage in all manufacturing.
B. Because economies of scale and first-mover advantage create barriers to entry for later competitors.
[CORRECT]
C. Because the second country lacks the necessary natural resources.
D. Because comparative advantage is determined solely by labor productivity differences.
Correct Answer: B
Rationale: New trade theory, developed by Paul Krugman and others, emphasizes that economies of
scale and first-mover advantages can lead to trade patterns that are not explained by comparative
advantage alone. A country that first achieves large-scale production benefits from lower average costs,
making it difficult for later entrants to compete even if they have lower potential costs.
Q6:
A country has highly specialized and demanding domestic consumers, a strong network of domestic
suppliers in related industries, and intense rivalry among domestic firms. According to Michael Porter’s
diamond of national competitive advantage, which of these is NOT one of the four determinants?
A. Factor conditions
B. Demand conditions
