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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.
Based on the concept of comparative advantage, which product should South Korea focus on exporting?
South Korea ought to export steel
South Korea should export both steel and DVDs
Japan should specialize in exporting steel
Japan should export steel along with DVDs
2.
What is the opportunity cost of producing one DVD in South Korea?
0.5 tons of steel
1 ton of steel
1.5 tons of steel
2 tons of steel
3.
How can G. MacDougall’s empirical findings be best interpreted?
Proof contradicting the classical trade theory
Indication disproving the Heckscher-Ohlin framework
Confirmation supporting the Ricardian model
Validation of the Heckscher-Ohlin theory
4.
G. MacDougal analyzed the export-to-labor productivity ratios between the United States and the United Kingdom to evaluate which economic theory?
Ricardian theory of comparative advantage
Heckscher-Ohlin model of comparative advantage
Linder's overlapping demand hypothesis
None of the above
All of the above
5.
Who is credited with establishing the theory of reciprocal demand?
Theory of reciprocal demand
Theory of absolute advantage
Theory of comparative advantage
Theory of mercantilism
6.
If the price of good S in country A without trade is lower than in country B, what is the expected outcome once trade is permitted?
Country A will probably export good S to country B
Country A will probably import good S from country B
Neither country will be interested in trading
None of these options
7.
Which of the following statements is true in an autarky equilibrium?
Output matches consumption levels
Exports are balanced by imports
No international trade takes place
All the above statements are correct
8.
Why do small countries typically gain the most from free trade?
Because they have higher productivity compared to their larger trade partners
Because their productivity is lower than that of bigger trading nations
Because their income levels and consumer preferences are less than those of larger partners
Because the terms of trade they achieve are close to the production possibility frontiers of their larger trading counterparts
9.
What does the term 'terms of trade' refer to in economic transactions?
The prices paid for all goods that a country exports
The prices obtained from all goods a country sends abroad
The prices earned from exports compared to the prices paid for imports
The price relationship between raw materials and finished products
10.
When a nation's production possibility curve is bowed outward (concave towards the origin), what type of opportunity costs does it indicate?
unchanging opportunity costs
declining opportunity costs
initially rising then falling opportunity costs
rising opportunity costs
11.
What happens to the price line if the relative price (MRT) of good S rises?
Move outward without changing its slope
Move inward without altering its slope
Increase in steepness
Decrease in steepness
12.
What is the relative price (marginal rate of transformation) of good S expressed in terms of good T?
2
0.5
Infinity
One thousand
Not applicable
13.
In which product does Country A hold a comparative advantage?
Wine
Beer
Both wine and beer
Neither wine nor beer
14.
What is the relative price of wine measured in units of beer in country A when it operates under autarky?
One unit of wine equals one unit of beer
One unit of wine equals two units of beer
One unit of wine equals three units of beer
One unit of wine equals one-third of a unit of beer
15.
Under autarky conditions, what is the relative price of good X expressed in terms of good Y in country A?
Half a unit of Y
Three-quarters of a unit of Y
One unit of Y
Four-thirds of a unit of Y
Two units of Y
16.
If nations engaged in trade based on absolute advantage, what would be the expected outcome?
Country A would send product X to country B
Country B would receive product Y from country A
Both countries would prefer to avoid trading
None of the stated options are correct
17.
In which product does Country A hold an absolute advantage?
Product X
Product Y
Neither Product X nor Product Y
Both Product X and Product Y
None of the above
18.
What factor defines absolute advantage between nations?
The real differences in labor output among countries
The proportional variations in labor efficiency across countries
A combination of both real and proportional labor productivity differences
Neither real nor proportional labor productivity differences
19.
Which of the following statements aligns with the Classical theory of international trade?
Nations with lower wage levels exclusively engage in exporting goods.
Only nations with elevated wage rates participate in importing products.
Countries featuring higher wages inevitably experience increased price levels.
None of the statements above are accurate.
20.
According to the classical trade theories proposed by Smith and Ricardo, which of the following outcomes is expected?
Nations will fully specialize in producing goods they export
Significant trade takes place between countries with varying technological capabilities
Smaller nations can benefit from trade when engaging with larger economies
All the above statements are true
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