foundations of modern trade theory MCQs – Page 2

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

foundations of modern trade theory Mcqs

21. In autarky, the relative price of wine, in terms of beer, in country A is ?
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A. 1W = 3B

B. 1W = 1/3B

C. 1W = 1B

D. 1W = 2B

22. Given free trade, small nations tend to benefit the most from trade since they ?
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A. Are more productive than their large trading partners

B. Are less productive than their large trading partners

C. Have demand preferences and income levels lower than their large trading partners

D. Realize terms of trade lying near the MRTs of their large trading partners

23. Under free trade, Canada would not realize any gains from trade with Sweden if Canada ?
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A. Specializes partially in the production of its exports goods

B. Specializes completely in the production of its export good

C. Trades at Canadas marginal rate of transformation

D. Trade at Swedens marginal rate of transformation

24. In autarky, when a community maximizes its standard of living its production point is ?
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A. on the production possibility frontier

B. below the production possibility frontier

C. above the production possibility frontier

D. cant tell without more information

25. Mercantilism ?
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A. Is the philosophy of free international trade?

B. Was a system of export promotion and barriers to imports practiced by governments?

C. Was praised by Adam Smith in the Wealth of Nations

D. Both (a) and (c)

26. In autarky the relative price of wine, in terms of beer, in Country B is ?
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A. 1W = 6B

B. 1W = 5B

C. 1W = 3B

D. 1W = 4 1/2B

27. If the countries were to trade along the lines of absolute advantage ?
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A. None of the above

B. Neither country would want to trade

C. B would import Y from A

D. A would export X to B

28. If a country has a bowed out (concave to the origin) production possibility frontier then production is said to be subject to ?
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A. constant opportunity costs

B. increasing opportunity costs

C. first increasing and then decreasing opportunity costs

D. decreasing opportunity costs

29. G. MecDougall showed in his tests that ?
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A. None of the above

B. relatively higher U.S labor productivity was associated with relatively higher U.K export ratios

C. Labor productivity ratios and export ratios were not associated with each other

D. relatively high U.K labor productivity was associated with relatively higher U.K export ratios

30. According to the principle of comparative advantage ?
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A. South Korea should export steel and DVDs

B. South Korea should export steel

C. Japan should export steel

D. Japan should export steel and DVDs

31. Country A has the comparative advantage in ?
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A. Wine

B. Beer

C. Both wine and beer

D. Neither wine nor beer

32. The opportunity cost of one DVD in South Korea is ?
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A. One ton of steel

B. One and one-half tons of steel

C. Two tons of steel

D. One-half ton of steel

33. The classical trade theories of Smith and Ricardo predict that ?
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A. Considerable trade will occur between countries with different levels of technology

B. Small countries could obtain of the gains from trade when trading with large countries

C. All of the above

D. Countries will completely specialize in the production of export goods

34. If the relative Price (MRT) of T were to increase, then the price line would ?
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A. Become flatter

B. shift in a parallel fashion

C. Shift out in a parallel fashion

D. become steeper

35. G. MacDougalls empirical results can be interpreted as ?
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A. evidence against the classical model

B. Support for the Ricardian modal

C. Support for the Heckscher-Ohlin model

D. evidence against the Heckscher-Ohlin model

36. Country A 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

37. Absolute advantage is determined by ?
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A. actual differences in labor production between countries

B. relative differences in labor productivity between countries

C. Both (a) and (b)

D. Neither (a) nor (b)

38. Which countries terms of trade improved between 1990 and 2000 ?
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A. Mexico and Sweden

B. Mexico and Denmark

C. Sweden and Denmark

D. Sweden and Spain

39. If the international terms of trade settle at a level that is between each countrys opportunity cost ?
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A. There is no basis for gainful trade for either country

B. Both countries gain from trade

C. Only one country gains from trade

D. One country gain and the other country loses from trade

40. In autarky equilibrium ?
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A. All of the above

B. Exports equal imports

C. there is no trade

D. Production equals consumption

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