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Foundations Of Modern Trade Theory
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Foundations Of Modern Trade Theory – MCQs
46 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
According to G. MecDougall's research, what relationship did he find between labor productivity and export ratios?
Higher U.S. labor productivity correlated with increased U.K. export proportions
Greater U.K. labor productivity corresponded with higher U.K. export ratios
There was no correlation between labor productivity and export ratios
None of the stated options are correct
2.
Which of the following factors can contribute to dynamic gains from trade?
Increased investment activity triggered by market liberalization
Cost advantages achieved through large-scale production after markets open
Enhanced competition enabled by the removal of trade barriers
All of the above
None of the above
3.
Under conditions of free trade, when would Canada fail to gain any benefits from trading with Sweden?
Engages in trade at Canada's marginal rate of transformation
Trades according to Sweden's marginal rate of transformation
Fully specializes in producing its export commodity
Partially specializes in manufacturing its export products
4.
In a self-sufficient economy, where does the production point lie when the community optimizes its living standards?
Inside the production possibility curve
Exactly on the production possibility curve
Beyond the production possibility curve
Indeterminate without additional details
5.
In an economy, when a society achieves the highest possible standard of living, where is its production and consumption point located?
Inside the production possibility curve
Exactly on the production possibility curve
Beyond the production possibility curve
Cannot determine without additional data
6.
Between 1990 and 2000, which pair of countries experienced an improvement in their terms of trade?
Denmark and Mexico
Denmark and Sweden
Spain and Sweden
Sweden and Mexico
7.
When a nation's production possibilities frontier is a straight line sloping downward, what type of opportunity costs does it indicate?
constant opportunity costs
declining opportunity costs
initially rising then falling opportunity costs
rising opportunity costs
variable opportunity costs
8.
What happens to the budget line when the relative price (MRT) of T rises?
Move outward without changing slope
Move inward without changing slope
Become more steeply inclined
Become less steep
9.
What is the marginal rate of transformation (MRT) of good T expressed in terms of good S?
2
0.5
500
1000
10.
In which product does Country B hold a comparative advantage?
Wine
Beer
Both wine and beer
Neither wine nor beer
Not applicable
11.
What is the relative price of one unit of wine expressed in terms of beer in Country B when it is self-sufficient?
One unit of wine equals three units of beer
One unit of wine equals four and a half units of beer
One unit of wine equals five units of beer
One unit of wine equals six units of beer
12.
In which product does Country A hold an absolute advantage?
Beer
Wine
Both Beer and Wine
Neither Beer nor Wine
13.
If two countries engage in trade based on their comparative advantages, what would Country A export to Country B?
Country A would send product X to Country B
Country A would send product Y to Country B
Both countries would refrain from trading
None of these choices are correct
14.
In which product does Country B hold an absolute advantage?
Product X
Product Y
Neither Product X nor Product Y
Both Product X and Product Y
15.
What factor determines comparative advantage between nations?
Absolute variations in labor efficiency among countries
Proportional differences in labor productivity across countries
A combination of both absolute and proportional productivity differences
Neither absolute nor proportional productivity differences
16.
According to Ricardo's classical theory, what primarily determines the pattern of international trade?
Absolute efficiency
Comparative advantage
Tangible superiority
Prevailing wind directions
Geographical proximity
17.
What primarily determines the benefits a country gains from engaging in international trade?
The principle of labor value theory
The extent to which the autarky price deviates from the global terms of trade
The assumption that a nation inevitably suffers losses from trade
Every statement mentioned above
18.
What best describes the mercantilist economic system?
It advocates for unrestricted global trade.
It involves government policies that encourage exports and restrict imports.
It was highly endorsed by Adam Smith in his book Wealth of Nations.
Both options A and C are correct.
None of the above.
19.
When the international trade terms fall between the opportunity costs of two countries, what is the outcome?
Neither country benefits from trading
Both nations experience advantages from trade
Only a single country benefits from trading
One country benefits while the other suffers losses
20.
Who is credited with the first formal introduction of the principle of comparative advantage?
Adam Smith
David Ricardo
Eli Heckscher
Bertil Ohlin
John Maynard Keynes
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