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Unit 1 exercise

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Multiple-choice questions:

1. In 2008, the share of international visible trade is around _______ of the total

value of international trade.

A.80% B. 60% C. 40% D. 20%

A. Which of the following statements about SITC is NOT correct?

A. SITC is drafted for the purpose of collecting statistics of the many varieties of

goods in international trade.

B. SITC is a standard for classification of international trade in commodities.

C. SITC is a standard for classification of international trade in services.

D. SITC classifies international trade commodities into 10 sections.

3. In 2008, the share of trade in commercial services was about ____ of the total value

of international trade.

A. 10% B. 20% C. 30% D. 40%

4. In 2008, ____ was the world’s largest exporter and importer of commercial

services.

a. the United States b. Germany c. Japan d. France

5. The service or a professional adviser is supplied through a visit to him by his

foreign client. According to the definition of trade in services in GATS, this service

is____.

a. cross border supply of services.

b. consumption abroad.

c. commercial presence in the consuming country.

d. presence of natural persons.

6. Which of the following statements is not correct?

a. A favorable balance of trade is known as a trade surplus and consists of exporting

more than is imported.

b. The balance of trade is an important part of the current account of a nation’s

balance of payment.

c. Since 1994, Chian has maintained favorable trade balance for 15 years in

succession.

d. Since the mid-1980s, the United States has had a growing surplus in tradeable

goods, especially with Asian nations (China and Japan).

7. If a country uses general trade system in collecting statistic figures, this means

____

a. the statistical territory of the country coincides with its customs territory.

b. the inward and outward movement of goods through its bonded warehouses is not

recorded in ties statistic figures.

c. the inward and outward movement of goods through free trade zones is not

recorded in its statistic figures,

d. the statistical territory of the country coincides with its economic territory.

8. The total volume of international trade merchandise is ____

a. the summation of the imports or exports of all nations in the world.

b. the summation of the value of imports of all nations in the world

c. the summation of the value of exports of all nations in the world

d. the summation of the value of imports and exports of the major traders in the world.

9. Which of the following statements is correct?

a. The value of international trade can reflect the real development of international

trade.

b. The quantum of international trade can reflect the real development of international

trade.

c. There is no difference between the value of the international trade and the quantum

of international trade.

d. The value of international trade in different periods is usually comparable.

10. Most international trade today is classified as trade in ____

a. services. b. mineral products.

c. manufactured products. d. agricultural products.

11. In 2007, ____ dominated China’s exports.

a. machinery and transportation equipment b. toys, clothing and furniture

c. steel d. food

12. In 2008, the largest world exporter of merchandises was ____.

a. Germany b. China c. Japan d. the US

13. In 2008, China was among the top ____ exporters in the world.

a. 3 b. 5 c. 10 d. 20

14. In 2007, the share of ____ in China’s exports was the largest one.

a. North America b. Europe c. Asia d. Africa

15. Which of the statements about the degree of dependence on foreign trade is

correct?

a. It is the ratio of exports of goods to GDP.

b. It is the ratio of experts and imports of goods to GDP.

c. In general, the ratio of dependence on foreign trade for China has been decreasing

in recent years.

d. It is impossible that the ratio of dependence on foreign trade exceeds 100%.

2. True or false questions:

1. The total volume of international trade in merchandise is the aggregated volume of

imports or exports of all nations throughout the world.

2. The world merchandise exports have on average outgrown the world production

since 1970s.

3. The quantum of international trade is a less precise expression the value of

international trade in that it does not reflect the real change of international trade.

4. At present, world trade tends to be concentrated among relatively few major

traders.

5. The degree of dependence on foreign trade of an individual country means that its

economic prosperity is dependent upon economic prosperity in the world as a whole.

Unit 2 Exercise

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1. In the Mercantilist view of international trade (in a two-country world), ____

a. both countries could gain from trade a t the same time, but the distribution of the

gains depended upon the terms of trade.

b. both countries could gain from trade at the same time, and the terms of trade were

of no consequence for the distribution of the gains.

c. neither country could ever gain from trade.

One country’s gain from trade was associated with a loss for the other country.

2. The policy of minimum government interference in or regulation of economic

activity advocate by Adam Smith and the Classical economists, was known as____

a. the law of comparative advantage. B. laissez-faire.

c. the labor theory of value. D. Mercantilism.

3. In Adam Smith’s view, international trade____

a. benefited both trading countries.

b. was based on absolute cost differences.

c. reflected the resource base of the countries in question.

d. all of the above.

4. Country A has 1000 units of labor. It takes 10 units of labor to develop 1 unit of

software and produce 10 computers. What is the opportunity cost of a software in

terms of computers?

a. 10 b. 0.1 c. 100 d. 50

5. In the Ricardo model, ____

a. there is only one factor of production.

b. international trade is a negative-sum game.

d. differences in factor endowments give rise to international trade.

d. there is only one industry in each country.

6. If Country A has an absolute advantage in every good, then____

a. it should not engage in international trade.

b. it should engage in a small percentage of trade.

c. it should still export goods in which it has a comparative advantage.

d. this is an impossible situation.

7. If Country A has a comparative advantage over Country B in producing textile, it

means that____

a. Country A produces textile relatively less efficiently than County B does.

b. the labor productivity in textile industry in Country A is lower than in Country B.

c. the relative price of textile (to another product) in Country A is lower than in

Country B.

d. Country B will never produce textile if free trade is allowed.

8. The Ricardian model exhibits gains from trade____

a. for both trading countries.

b. only if countries specialize completely.

c. only for one of the trading countries.

d. only if each country has an absolute advantage in one of the industries.

9. The opportunity cost of producing watches in terms of shoes is 50 in Country A and

is 10 in Country B. Based on the Ricardian model, what can we conclude about the

pattern of trade?

a. Country A will export watches and import shoes.

b. We need to know what the relative price of watches in terms of shoes to answer this

question.

c. Trade will not occur.

d. Country A will export shoes and import watches.

10. Which of the following is not an assumption in the Ricardian model?

a. Labor productivity in each country is fixed.

b. Markets are perfectly competitive.

c. Each country has only one factor of production and its amount is fixed.

d. Labor can freely move across countries.

11. Given the following Classical-type table showing the number of days of labor

input required to obtain one unit of output of each of the two commodities in each of

the two counties:

Ship Computers

United States 4 days 3 days

United Kingdom 5 days 6 days

The United States has an absolute advantage in the production of ____.

a. Ships (only) b. computers (only)

c. both ships and computers d. neither ships nor computers

12. Given the following Ricardo-type table showing the amount of labor input needed

to produce one unit of output of the two goods in the two countries:

Ship Computers

Germany 6 days 9 days

United Kingdom 4 days 8 days

a. The United Kingdom has an absolute advantage in both goods and a comparative

advantage in cloth.

b. The pre-trade price ratio in the United Kingdom is 1 steel : 2 cloth.

c. The United Kingdom has an absolute advantage in neither good but a comparative

advantage in steel.

d. The pre-trade price ratio in Germany is 1 cloth : 1.5 steel

13. In the Classical (Ricardo) analysis, ____

a. if a country has an absolute advantage in a good, it also has a comparative

advantage in the good.

b. if a country has a comparative advantage in a good, it cannot have an absolute

advantage in the good.

c. a country can have a comparative advantage in a good at the same time that it has

an absolute advantage in that good.

d. a country with an absolute advantage in all goods cannot gain from trade.

Unit 3 Exercise

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1. Multiple choices:

1. Which of the following is not an assumption of the Hechscher-Ohlin model?

a. Markets are competitive.

b. Technology is the same across countries.

c. The supply of factors of production grows over time.

d. Factors of production can be used in different industries.

2. If Country A is defined as “relatively capital-abundant” in relation to Country B by

the “price” definition of factor abundance, then the price of labor relative to the price

of capital is ____ in Country A would export relatively ____ good s to Country B.

a. higher; capital-intensive b. higher; labor-intensive

c. lower; capital-intensive d. lower; labor-intensive

3. What is the main difference between the Hechscher-Ohlin model and the Ricardian

model?

a. Unlike in the Ricardian model, endowments of factors of production affect trade

patterns in the Hechscher-Ohlin model.

b. Unlike in the Ricardian model, factors are mobile across industries in the

Hechscher-Ohlin model.

c. Unlike in the Ricardian model, trade is not assumed to be free in the

Hechscher-Ohlin model.

d. Unlike in the Ricardian model, all factors of production gain as a result of trade in

the Hechscher-Ohlin model.

4. What does the Hechscher-Ohlin model predict about the pattern of trade?

a. Each country sells abundant factors of production.

b. Each country specializes in the production of goods that use available technology

efficiently.

c. The pattern of trade depends on the size of the economy.

d. Each country specializes in the production of goods that use its abundant factors

intensively.

5. If relatively capital abundant Country A opens trade with relatively labor abundant

Country B and the trade takes place in accordance with the Heckscher-Ohlin theorem,

what would be the consequence for factor prices (w/r) in the two countries?

a. (w/r) rises in A and falls in B b. (w/r) rises in A and also rises in B

c. (w/r) falls in A and rises in B d. (w/r) falls in A and also falls in B

6. The Hechscher-Ohlin model predicts that prices of factors of production equalize

across countries. But we do not observe factor price equalization principally

because____.

a. the Hechscher-Ohlin model is not useful

b. prices of goods are inconsistently measured across countries.

c. there are differences in technology across countries that the Hechscher-Ohlin model

ignores.

d. there are non-tradable goods that the Hechscher-Ohlin model does not account for.

7. An implication of the Hechscher-Ohlin theorem is that____.

a. if two countries have identical tastes, then no trade will occur between them.

b. the relative price of a country’s scarce factor of production will rise when the

country is opened to trade.

c. income distribution in a country does not change when a country is opened to trade.

d. two countries with identical tastes can still have a basis for trade if factor

endowments of the countries differ and if factor intensities of the commodities differ.

Unit 12 Exercises

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1. Multiple-choice questions:

1. The sale of particular goods such as ornaments, jewels, paintings, artworks, etc. is

usually made by____.

a. sale as seen b. sale by buyer’s sample

c. sale by seller’s sample d. sale by specifications

2. The sample reproduced by the seller according to the buyer’s sample for the

buyer’s confirmation is called____.

a. duplicate sample b. confirming sample

c. reference sample d. buyer’s sample

3. The most widely adopted method sale is ____.

a. sale by sample b. sale as seen

c. sale by specifications d. sale by trade mark and brand

4. According to the CISG, if the quantity of goods the seller delivers is greater than the

contracted quantity, ____.

a. the buyer must accept the excess quantity.

b. the buyer is entitled to reject all the goods

c. the buyer is entitled to reject the excess quantity

d. all of the above are not correct.

5. Which of the following is China’s official metrical system?

a. The metric system b. The British system

c. The American system d. The international system of units (SI)

6. At present, which of the following is not the system of weight and measures

commonly used in international trade?

a. SI b. The French System

c. The British system d. The metric system

7. The weight applicable for weighing products with unstable moisture contents such

as wool, cotton, raw silk, etc. is ____.

a. conditioned weight b. theoretic weight

c. net weight d. dry weight

8. The use of shipping mark on the outer packing is not aimed at ____.

a. promoting the sales of goods

b. facilitating shipping and storing

c. preventing the goods from being wrongly delivered or shipped

d. facilitating the identification and count of the goods in the process of loading and

unloading

2. True or False questions:

1. Although the British system and the American system of weights and measures are

closely related, there are a number of differences between them.

2. According to the CISG, if the buyer takes delivery of all or part of the excess

quantity delivered by the seller, he must pay for it at the contract rate.

3. The quantity clause in the contract provides “500M/T 10% more or less at seller’s

option”. This means the quantity delivered by the seller can be less than 450M/T or

more than 550M/T.

4. All the marks on the outer packages are called shipping marks.

5. China’s GSI country codes are 960-965.

6. Packing charges are usually included in price.

7. Theoretically, use of hard currency (currency that is reliable and stable and more in

demand) as payment currency is beneficial to the exporter.

Unit 13 Exercise

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1. Multiple-choice questions:

1. the most commonly used mode of transport in international trade is ____.

a. air transport b. road transport c. ocean transport d. railway transport

2. If an item is marked with “M” in the tariff, then the liner rate for this item is

collected on ____.

a. its unit b. its weight c. its capacity d. its measurement

3. FIO in the voyage charter-party means that the shipowner is ____.

a. only responsible for the charges of loading.

b. only responsible for the charges of unloading.

c. responsible for both the loading and unloading charges

d. responsible neither for the loading charges nor for the unloading charges

4. Liner terms in the voyage charter-party mean that the shipowner is ____.

a. only responsible for loading charges

b. only responsible for unloading charges

c. responsible for both the loading and unloading charges

d. responsible neither for the loading charges nor for the unloading charges

5. In voyage charter, shipowner is only responsible for loading charges under____.

a. FI b. FO c. FIO d. Liner terms

6. Lay days are commonly expressed as ____.

a. running days b. working days

c. weather working days d. eight hours’ working days

7. Which of the following modes provides door-to-door container service or

house-to-house container service?

a. CY/CY b. CY/CFS c. CFS/CY d. CFS/CFS

8. Container capacity is measured in ____.

a. FEU (Forty-foot Equivalent Units) b. TEU (Twenty-foot Equivalent Units)

c. EEU (Eight-foot Equivalent Units) d. NEU (Nineteen-foot Equivalent Units)

9. The document which can be transferred by endorsement is ____.

a. rail waybill b. air waybill c. sea waybill d. order bill of lading

10. Which of the following are not rules governing bill of lading?

a. The Hague Rules b. The Hague-Visby Rules

c. The Hamburg Rules d. The New York Rules

the field of consignee of a B/L, “To order of ABC CO. Ltd” is marked. This

B/L is ____.

a. a straight B/L b. a blank B/L c. an order B/L d. a direct B/L

12. Marin Bs/L perform a number of functions except____.

a. evidence of the contract of carriage b. receipt for the goods shipped

c. document of title to goods d. non-negotiable document

13. Which of the following terms on the B/L shows that the bill of lading is a clean

B/L?

a. One carton short b. Insufficient packing

c. In apparent good order and condition d. Missing safety seal

14. The issuance of ____ is unlawful.

a. stale Bs/L b. on deck Bs/L c. anti-dated Bs/L d. charter-party Bs/L

2. True or false questions

1. Ocean transport is a very fast mode of transport.

2. Time charter generally does not include loading and unloading costs in the charter

rate.

3. In voyage charter, the vessel is under the control of the charterer who is responsible

for equipping and manning the vessel.

4. A “B/L blank endorsed” refers to the B/L without any endorsement.

5. All Bs/L are transferable.

6. A bill of lading with a notation of “insufficient packing” is a foul bill of lading.

7. A short form bill of lading is usually not acceptable.

8. According to the CISG, in the absence of terms as to whether transshipment is

allowed or not in the contract, transshipment is to be construed as allowed.

9. Time charter means that the charterer hires the vessel for a period of time without

crew.

10. Dispatch money and demurrage clause normally appear in the time charter-party.

Unit 14 Exercise

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I. Multiple-choice questions:

1. As a type of perils of the sea, tsunami is ____.

a. a natural calamity b. a fortuitous accident

c. an additional risk d. a general extraneous risk

2. As a type of perils of the sea, being stranded is ____.

a. a natural calamity b. a fortuitous accident

c. an additional risk d. a general extraneous risk

3. In ocean transit, sacrifices resulted from the jettisoning of some cargoes on a ship

to keep the ship afloat during a storm are ____.

a. a general average b. a particular average

c. a total actual loss a constructive total loss

4. In ocean transit, when the subject matter insured is irretrievable deprived thereof,

there is ____.

a. a constructive loss b. an actual total loss

c. a general average d. a particular average

5. In ocean transit, the subject matter insured -- a precision instrument amounting to

USD100, 000 was badly damaged, the cost of recovering it would be USD120, 000.

In such case, the loss was____.

a. a constructive total loss b. an actual total loss

c. a partial loss d. a total loss

6. The losses caused by theft in ocean transit are recoverable if the goods had been

insured against ____.

a. FPA b. WPA

c. ALL RISKS d. any of the general additional insurance in the ICC

7. Which of the following risks is/are covered by All Risks?

a. War b. Strikes and delay

c. TPND d. Aflatoxin and on deck

8. Which of the following does not cover partial loss or damage caused by natural

calamities?

a. WA b. FPA c. AR d. ICC (A)

9. The widest insurance coverage in ICC is ____.

a. ICC(A) b. ICC(B) c. ICC(C) d. ICC(D)

10. If the insured amount is not clearly stated in CIF contract, it is customary to insure

for ____.

a. 100%CIF price b. 110%CIF price c. 115%CIF price d. 120%CIF price

II. T or F questions:

1. Warehouse to warehouse clause is a shipment clause meaning that the carrier is

responsible for shipping the goods from the seller’s warehouse to the buyer’s

warehouse.

2. Both general additional risks and special additional risks in the Ocean Marine

Cargo Clause of the PICC can be covered independently.

3. Although All Risks in the Ocean Marine Cargo Clause of the PICC does not cover

special additional risks, it covers general additional risks.

Unit 15 exercises

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I. Multiple choice questions:

1. The most commonly used instrument of payment in international trade is ____.

a. bill of exchange b. cheque c. promissory note d. bill of lading

2. Bank A draws a draft on Bank B ordering it to pay US$100,000 to Company C at

30 days after sight. This draft is a ____.

a. Trade draft after sight b. trade draft at sight

c. banker’s draft after sight c. banker’s draft at sight

3. A ____ is payable on presentation to the drawee.

a. demand draft b. usance draft c. time draft d. draft after sight

4. Company A draft on Company B ordering it to pay USD100,000 to Bank C on

demand. This draft is a ____.

a. trade draft after sight b. trade draft at sight

c. banker’s draft after sight d. banker’s draft at sight

5. There are ____ parties to a promissory note, whereas there are ____ parties to a bill

of exchange.

a. 2; 2 b. 3; 2 c. 3; 2 d. 2; 3

6. From the perspective of collecting proceeds, the seller assumes the least risks in

____.

a. open account sales b. D/P after sight sales.

b. payment in advance sales d. D/A sales

7. The remitting bank involved in the collection ____.

a. guarantees to the draft

b. is the drawer of the draft

c. is liable for carrying out the seller’s collection instruction

d. usually presents the collection items to the drawee directly.

8. Under clean collection, usually only ____ is necessary.

a. the draft b. the invoice

c. the bill of lading d. the commodity inspection certificate

9. In which of the following methods of payment, the seller faces the greatest risks in

terms of collection proceeds?

a. D/A b. D/P at sight c. D/P after sight d. letter of credit

10. The nominated bank who purchases drafts (drawn on a bank other than the

nominated) and/or documents by advancing or agreeing to advance funds to the

beneficiary on or before the banking day on which reimbursement is due to it is ____.

a. accepting bank b. negotiating bank c. confirming bank d. paying bank

II. T or F questions:

1. A promissory note differs from a bill of exchange in that the maker of a note

promises to personally pay the payee rather than ordering a third party to do so.

2. Upon acceptance the drawer, now the acceptor, becomes the principal debtor and

the party primarily liable for the payment of the bill.

3. A cheque is a bill of exchange drawn on a bank payable on a determinable future

date.

4. A banker’s draft is a draft drawn on a bank.

5. The time of payment in a sight draft may be expressed as “at 30 days after sight”.

6. The draft in D/A at sight is a sight draft.

7. When payment is made D/A, the collecting bank should accept the draft and

release the documents to the seller.

8. The negotiating bank normally has no right of recourse against the drawer, namely

the beneficiary in the credit, in the event of dishonor by the issuing bank after its

negotiation.

9. The beneficiary (the seller) should effect shipment immediately upon receipt of

the letter of credit.

10. When payment is made by a confirmed letter of credit, the seller is assured that

payment will be made by the confirming bank no matter the issuing bank is

insolvent or not.

1、This contract is not a real CIF contract. According to Incoterms, CIF refers to cost,

insurance and freight, which means the seller fulfills his obligation to deliver when

the goods are on board the ship at the stipulated time, and risks and responsibilities

are transferred to the buyer from that point. The seller’s obligation to arrange and pay

for the carriage does not in itself extend its delivery obligation up to the point of

destination.

But in this case, the clause which states that “the seller ensures that the ship arrive at

British ports on Dec. 2nd. If the ship arrives at the port of destination later than

December 2, the seller should agree to cancel the contract at the request of the buyer,

if the payment has been made, then the seller should refund the buyer for the

payment” changes the very nature of CIF. This clause means the goods must actually

arrive at British ports at the specified date and the seller also must take this

responsibility of the safe arrival of the goods.

2、 In this case, the sale is made by specifications. Therefore, the seller’s delivery

obligation was to provide the goods which were in conformity with the specifications.

In other words, the seller was entitled to reject the buyer’s claim which was on the

ground that the goods did not comply with the sample. It was obvious that the buyer

regarded the information in the fax as part of quality clause of the contract. Actually it

was not. The lesson that A should draw from this case was that the fax should make it

clear that the sample was only for reference.

3、B’s method was not proper. According to the CISG, the quality of the goods

delivered by the seller should be in the fully conformity with what is described in the

contract, otherwise the buyer is entitled to reject the goods and /or claims for

compensation, even ask to cancel the contract. In this case, although the supplemented

tea was superior in quality, B broke the contract. A may claim for damage on the

ground that B was in breach of contract. In such case, B would be in a very

disadvantageous position.