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foundations of modern trade theory MCQs

Practise focused foundations of modern trade theory questions with marked answers for exam preparation and subject revision.

foundations of modern trade theory Mcqs
1. Country B has an absolute advantage in ?
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A. Product X

B. Product Y

C. Neither X nor Y

D. Both X and Y

2. G. MacDougal compared export ratios and labor productivity ratios for the United States and the United Kingdom in order to test the:
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A. Heckscher Ohl in theory of comparative advantage

B. Linder theory of overlapping demand all of the above

C. None of these

D. Ricardian theory of comparative
3. The relative price (MRT) of T in terms of S is ?
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A. 2

B. 1000

C. 500

D. 2-Jan

4. In autarky, the relative price of X, in terms of Y in A would be ?
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A. 3/4 Y

B. 1 Y

C. 4/3 Y

D. 1/2 Y

5. In the classical model of Ricardo, the direction of trade is determined by ?
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A. Absolute advantage

B. Physical advantage

C. Comparative advantage

D. Which way the wind blows

6. If the relative price (MRT) of S were to increase, then the price line would ?
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A. shift out in a parallel fashion

B. Become steeper

C. Become flatter

D. shift in a parallel fashion

7. According to the Principle of absolute advantage Japan should ?
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A. Export DVDs

B. Export steel

C. Exports steel and DVDs

D. There is no basis for gainful specialization and trade
8. The earliest statement of the principle of comparative advantage is associated with ?
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A. Adam Smith

B. Berti IOhlin

C. David Ricardo

D. Eli Heckscher

9. If the autarky price of S were lower in country A than in country B then if trade were allowed ?
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A. neither country would want to trade

B. None of the above

C. A would likely export S to B

D. A would likely import S from B

10. The terms of trade is given by the prices ?
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A. Of primary products as opposed to manufactured products

B. Paid for all goods exported by the home country

C. Received for all goods exported by the home country

D. Received for exports and paid for imports
11. With international trade, what would be the maximum number of DVDs that Japan would be willing to export to South Korea in exchange for each ton of steel ?
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A. Two DVDs

B. Four DVDs

C. One DVD

D. Three DVDs

12. Country B has the comparative advantage in ?
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A. Wine

B. Beer

C. Both wine and beer

D. Neither wine nor beer

13. International trade is based on the nation that ?
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A. Different currencies are an obstacle to international trade

B. Goods are more mobile internationally than are resources

C. A countrys exports should always exceed its imports

D. Resources are more mobile internationally that are goods

14. If Hong Kong and Taiwan have identical production possibilities curves that are subject to increasing opportunity costs ?
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A. Trade would depend on the use of different currencies

B. Trade would depend on difference in demand conditions

C. There would be no basis for gainful trade

D. Trade would depend on economies of large-scale production

15. John Stuart Mill was the founder of the ?
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A. Theory of mercantilism

B. Theory of reciprocal demand

C. Theory of comarative advantage

D. Theory of absolute advantage

16. The opportunity cost of one DVD in Japan is ?
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A. Four tons of steel

B. One ton of steel

C. Three tons of steel

D. Two tons of steel

17. Country A has an absolute advantage in ?
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A. Beer

B. Wine

C. Both products

D. neither products
18. Dynamic gains from trade could result from ?
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A. The stimulus of additional investment spending as market open

B. Economies of large scale production as markets open

C. Additional competition made possible by the opening of markets

D. All of the above
19. With International trade, what would be the maximum amount of steel that South Korea would be willing to export to Japan in exchange for each DVD ?
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A. One ton of steel

B. One-half ton of steel

C. Two and one-half tons of steel

D. Two tons of steel
20. The gains from international trade are closely related to ?
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A. The labor theory of value

B. How much the autarky price differs from international terms of trade change

C. The fact that a country must lose from trade

D. All of the above