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Foundations Of Modern Trade Theory

Practice MCQs under Foundations Of Modern Trade Theory. 46 available Open paginated MCQ list →

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1.Based on the concept of comparative advantage, which product should South Korea focus on exporting?

South Korea ought to export steelSouth Korea should export both steel and DVDsJapan should specialize in exporting steelJapan should export steel along with DVDs

2.What is the opportunity cost of producing one DVD in South Korea?

0.5 tons of steel1 ton of steel1.5 tons of steel2 tons of steel

3.How can G. MacDougall’s empirical findings be best interpreted?

Proof contradicting the classical trade theoryIndication disproving the Heckscher-Ohlin frameworkConfirmation supporting the Ricardian modelValidation 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 advantageHeckscher-Ohlin model of comparative advantageLinder's overlapping demand hypothesisNone of the aboveAll of the above

5.Who is credited with establishing the theory of reciprocal demand?

Theory of reciprocal demandTheory of absolute advantageTheory of comparative advantageTheory 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 BCountry A will probably import good S from country BNeither country will be interested in tradingNone of these options

7.Which of the following statements is true in an autarky equilibrium?

Output matches consumption levelsExports are balanced by importsNo international trade takes placeAll 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 partnersBecause their productivity is lower than that of bigger trading nationsBecause their income levels and consumer preferences are less than those of larger partnersBecause 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 exportsThe prices obtained from all goods a country sends abroadThe prices earned from exports compared to the prices paid for importsThe 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 costsdeclining opportunity costsinitially rising then falling opportunity costsrising opportunity costs

11.What happens to the price line if the relative price (MRT) of good S rises?

Move outward without changing its slopeMove inward without altering its slopeIncrease in steepnessDecrease in steepness

12.What is the relative price (marginal rate of transformation) of good S expressed in terms of good T?

20.5InfinityOne thousandNot applicable

13.In which product does Country A hold a comparative advantage?

WineBeerBoth wine and beerNeither 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 beerOne unit of wine equals two units of beerOne unit of wine equals three units of beerOne 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 YThree-quarters of a unit of YOne unit of YFour-thirds of a unit of YTwo 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 BCountry B would receive product Y from country ABoth countries would prefer to avoid tradingNone of the stated options are correct

17.In which product does Country A hold an absolute advantage?

Product XProduct YNeither Product X nor Product YBoth Product X and Product YNone of the above

18.What factor defines absolute advantage between nations?

The real differences in labor output among countriesThe proportional variations in labor efficiency across countriesA combination of both real and proportional labor productivity differencesNeither 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 exportSignificant trade takes place between countries with varying technological capabilitiesSmaller nations can benefit from trade when engaging with larger economiesAll the above statements are true

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