International Economics Unit 1 Set 2
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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Unit 1 Set 2
Q1 | In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
- Tastes
- Military capabilities
- Size
- Relative availabilities of factors of production
Q2 | According to the Heckscher-Ohlin model, the source of comparative advantageis a country's
- Technology
- Advertising.
- Factor endowments
- Both A and B.
Q3 | One way in which the Heckscher-Ohlin model differs from the Ricardo model of comparative advantage is by assuming that __________ is (are) identical in all countries.
- Factor of production endowments
- Scale economies
- Factor of production intensities
- Technology
Q4 | The Heckscher-Ohlin model assumes that _____ are identical in all trading countries
- Gross domestic product
- Technologies
- Factor endowments
- Both A. and B
Q5 | As opposed to the Ricardian model of comparative advantage, the assumption of diminishing returns in the Heckscher-Ohlin model means that the probability is greater that with trade
- Countries will not be fully specialized in one product
- Countries will benefit from free international trade.
- Countries will consume outside their production possibility frontier.
- Comparative advantage is primarily supply related.
Q6 | Which of the following is false (for the Heckscher-Ohlin model)?
- Differences in technologies could be the source of gains from trade
- Some groups may gain and some may lose due to trade
- Gains for the trade-related winners will tend to be larger than losses of losers.
- None of the above.
Q7 | If a commodity is classified as "labor-intensive" at one set of relative factor prices but "capital-intensive" at another set of relative prices, this situation is known as
- demand reversal.
- factor-intensity reversal.
- balance of payment reversal
- factor price reversal
Q8 | If relatively capital-abundant country A opens trade with relatively labor- abundant country B an 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?
- (w/r) rises in A and falls in B
- (w/r) rises in A and also rises in B
- (w/r) falls in A and rises in B
- (w/r) falls in A and also falls in B
Q9 | An implication of the Heckscher-Ohlin Theorem is that
- if two countries have identical tsetse, then no trade will occur between them.
- the relative price of a country's scarce factor of production will rise when the country is opened to trade.
- income distribution in a country does not change when a country is opened to trade.
- two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if the factor intensities of the commodities differ.
Q10 | Theory of comparative advantage was presented by:
- Adam Smith
- Ricardo
- Hicks
- Arshad
Q11 | Which of the following is international trade:
- Trade between provinces
- Trade between regions
- Trade between countries
- (b) and (c) of above
Q12 | Which is NOT an advantage of international trade:
- Export of surplus production
- Import of defence material
- Dependence on foreign countries
- Availability of cheap raw materials
Q13 | Trade between two countries can be useful if cost ratios of goods are:
- Equal
- Different
- Undetermined
- Decreasing
Q14 | Modern theory of international trade is based n the views of:
- Robbins and Ricardo
- Adam Smith and Marshall
- Heckcsher and Ohlin
- Saleem and Kareem
Q15 | Foreign trade creates among countries:
- Conflicts
- Cooperation
- Hatred
- Both (a) & (b)
Q16 | Net exports equal:
- Exports x Imports
- Exports + Imports
- Exports - Imports
- Exports of services only
Q17 | If Japan and Pakistan start free trade, difference in wages in two countries will:
- Increase
- Decrease
- No effect
- Double
Q18 | According to Hecksher and Ohlin basic cause of international trade is:
- Difference in factor endowments
- Difference in markets
- Difference in political systems
- Difference in ideology
Q19 | All are advantages of foreign trade EXCEPT:
- People get foreign exchange
- Nations compete
- Cheaper goods
- Optimum utilisation of country's resources
Q20 | A primary reason why nations conduct international trade is because:
- Some nations prefer to produce one thing while others produce another
- Resources are not equally distributed to all trading nations
- Trade enhances opportunities to accumulate profits
- Interest rates are not identical in all trading nations
Q21 | A main advantage of specialization results from:
- Economics of large scale production
- The specializing country behaving as a monopoly
- Smaller production runs resulting in lower unit costs.
- High wages paid to foreign workers
Q22 | International trade in goods and services is sometimes used as a substitute for all of the following except:
- International movements of capital.
- International movements of labor.
- International movements of technology
- Domestic production of different goods and services
Q23 | If a nation has an open economy it means that the nation:
- Allows private ownership of capital.
- Has flexible exchange rates
- Has fixed exchange rates
- Conducts trade with other countries
Q24 | International trade forces domestic firms to become more competitive in terms of:
- The introduction of new products
- Product design and quality
- Product price
- All of the above
Q25 | The movement to free international trade is most likely to generate short-term unemployment in which industries:
- Industries in which there are neither imports nor exports
- Import-competing industries.
- Industries that sell to domestic and foreign buyers
- Industries that sell to only foreign buyers