Lesson M4.3.1

M4.3.1 Competitiveness, absolute and comparative advantage, terms of trade Quiz: OCR Economics, Unit 9

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M4.3.1, Competitiveness, absolute and comparative advantage, terms of trade: 20 multiple choice questions for the OCR Economics (H460), Unit 9: The global context, written with Revision Ninja.

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The 20 questions

  1. Which economist developed the theory of comparative advantage?

    • Adam Smith
    • John Maynard Keynes
    • Thomas Malthus
    • David Ricardo

  2. What does absolute advantage refer to in international trade?

    • Lower resource cost
    • Higher exchange rate
    • Lower opportunity cost
    • Higher tariff rate

  3. What forms the fundamental basis of comparative advantage between countries?

    • Equal capital stocks
    • Lower opportunity costs
    • Absolute resource abundance
    • Higher wage rates

  4. In the terms of trade formula, export prices are divided by which measure?

    • Export volume index
    • Import volume index
    • Consumer price index
    • Import price index

  5. Which hypothesis suggests primary commodity exporters face declining terms of trade?

    • Harrod-Domar model
    • Marshall-Lerner condition
    • Laffer curve
    • Prebisch-Singer hypothesis

  6. Which metric compares UK labour costs per unit of output to foreign competitors?

    • Terms of trade index
    • Nominal exchange rate
    • Real GDP per capita
    • Relative unit labour costs

  7. Which non-price factor directly improves a country's international competitiveness?

    • Lower domestic wages
    • Lower export tariffs
    • Higher product quality
    • Currency devaluation

  8. What key assumption underpins the classical model of comparative advantage?

    • Mobile international labour
    • Variable exchange rates
    • Zero transport costs
    • High trade tariffs

  9. What trade advantage does a country have if it uses fewer workers per car than a rival?

    • Competitive disadvantage
    • Absolute advantage
    • Comparative advantage
    • Monopoly power

  10. If export prices rise by 10% and import prices rise by 5%, terms of trade will:

    • Fall to zero
    • Worsen
    • Improve
    • Remain unchanged

  11. Export price index is 120 and import price index is 150. What is the terms of trade?

    • 80
    • 75
    • 110
    • 125

  12. Country X produces 20 units of wheat or 10 units of cloth. What is 1 cloth's cost?

    • 2 wheat
    • 0.5 wheat
    • 10 wheat
    • 5 wheat

  13. A sharp depreciation of the UK pound initially causes UK terms of trade to:

    • Deteriorate
    • Improve
    • Remain unchanged
    • Double

  14. Country Y produces 10 cars or 30 bikes. What is the opportunity cost of 1 car?

    • 30 bikes
    • 3 bikes
    • 0.33 bikes
    • 10 bikes

  15. Which change directly causes a country's non-price competitiveness to increase?

    • Interest rate cuts
    • Lower sales tax
    • Increased R&D spending
    • Currency depreciation

  16. An index of terms of trade rising from 100 to 110 indicates export prices have:

    • Equalised with imports
    • Fallen below imports
    • Outpaced import prices
    • Halved in value

  17. If domestic inflation is higher than trading partners', how is price competitiveness affected?

    • It becomes infinite
    • It falls
    • It rises
    • It remains constant

  18. Why might an improvement in terms of trade worsen the current account balance?

    • Fixed exchange rates
    • Elastic import demand
    • Inelastic export demand
    • High tariff rates

  19. Country A costs: 1 car = 4 food. Country B costs: 1 car = 2 food. Who exports cars?

    • Neither country
    • Both countries
    • Country A
    • Country B

  20. What impact does a persistent rise in global oil prices have on oil importers' terms of trade?

    • Equalisation
    • Improvement
    • No change
    • Deterioration

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