3 . 5.5. Multiple Choice Comprehension Check (basic Text 3.4)

Check the comprehension of the text choosing the answer which, you think, is correct.

1. As a result of international trade, the widenin g of the range of goods and services takes place.

a) As a result of international trade, each country loses a lot of goods it needs for consumption.

For example, Russia might u se more soft caviar, fish, etc.

b) As a result of international trade, some countries gain, some countries lose while the consumption

of good s remains stable

c) Yes, it is true. The economic welfare of each country increases by widening the range of

goods and services available for consumption, and production costs decrease.

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2. According to Ricardo, by the law of comparative advantage it was not necessary for one country to

have an absolute cost advantage in the production of a commodity.

a) I don’t think so. According to Adam Smith, countries must trade only in case of absolute

advantage in the production of goods.

b) The disadvantage of A. Smith’s theory of absolute cost advantage is that it does not give an

answer to the question why countries trade. D. Ricardo proved that even if a country produced

all commodities more expensively than any other, trade to the benefit of all could take

place provided only that the relative costs of production of the different commodities were

favourable.

c) It seems to me, countries enter the world market on an unequal basis. A developed country

always loses. Conclusion: international trade is dangerous for a backward country, it shouldn’t

be involved in it.

3. World trade expands faster than world output.

a) In my opinion, it is wrong. Production and trade expand or decrease at the same rate. It

cannot be otherwise.

b) Production, as a rule, grows faster than world trade.

c) Yes, it is true. Over the past fifty years, trade has grown on average at about 6 per cent per

annum, about 50 per cent more than world output.

4. In case we have an imperfect form of trade, it is the difference in size (volume) that is refunded.

a) In general, an imperfect form of trade occurs very seldom.

b) I think it is true. When barter trade takes place, one commodity may be more expensive than

the other. In this case the difference is refunded.

c) There is no great difference between an imperfect form and a perfect form of international

trade.

5. Barter is one of the forms of countertrade. A form of barter trade has grown in recent years in the

world.

a) I agree only partially. It goes without saying, the barter is a form of countertrade. As to the

fact that it grows, I don’t think it is true.

b) I believe the barter should be referred to a perfect form of trade, and its size, certainly, grows

world-wide.

c) Yes, it is true. The form of barter has grown in recent years in the USA, Australia and other

countries into a serious business activity.

6. Two main methods of operations are applied in international trade.

a) I don’t think so. All operations are executed in accordance with one principle — through an

intermediary.

b) I know two main methods of operations. They are direct and indirect.

c) I suppose the international trade does not differentiate between the two methods, but it uses

a lot of them. It seems to me, there are five of them.

7. Stockists execute operations on the basis of the commission agreement.

a) Yes, I’ve read about this form of international trade. It is applied to selling large-scale goods.

The exporter credits a stockist—intermediary.

b) The stockist is practically a stockjobber who buys and sells stocks and shares so as to take

advantage of variations in their prices.

c) The stockist is a person who acts on behalf of another person or organization.