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sources of comparative advantage MCQs

Practise focused sources of comparative advantage questions with marked answers for exam preparation and subject revision.

sources of comparative advantage Mcqs
1. The Heckscher-Ohl in model rules out the classical models basis for trade by assuming that _________ is (are) identical between countries?
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A. factor endowments

B. factor intensities

C. opportunity costs

D. technology
2. If tastes are identical between countries, then comparative advantage is determined by ?
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A. demand conditions only

B. supply and demand conditions

C. supply condition only

D. cant tell without more information

3. The trade model of the Swedish economies Heckscher and Ohlin maintains that ?
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A. The division of labor is limited by the size of the world market

B. Absolute advantage determines the distribution of the gains from trade

C. Comparative advantage determines the distribution of the gains from trade

D. A country exports goods for which its resource endowments are most suited
4. In his empirical test of comparative advantage Wassily Leontief found that ?
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A. U.S imports are labor intensive relative to U.S exports

B. U.S exports are neither labor nor capital intensive

C. None of the above

D. U.S exports are capital intensive relative to U.S imports

5. Intra-industry trade theory ?
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A. Explains why the United States might export autos and import clothing

B. ignores seasonal considerations for agricultural goods

C. Assumes that transport costs are very low or do not exist

D. Explains why the United States might export and import differentiated versions of the same product such as different types of autos
6. Should international transportation costs decrease the effect on international trade would include a (an) ?
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A. Smaller gain from trade

B. Decline in the income of home producers

C. increase in the volume of trade

D. Decrease in the level of specialization in production

7. One of the predictions of the Heckscher-Ohlin model is that ?
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A. countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other

B. countries with tend to specialize but not completely in their comparative advantage good

C. reciprocal demand leads to an equilibrium terms of trade by inducing change in both demand and supply

D. All of the above
8. By reducing the volume of trade transportation costs tend to ?
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A. eliminate all of the feasible gains from international trade

B. ensure that the process of product price equalization and factor price equalization are complete

C. stop the process of product price equalization and factor price equalization before they are complete:

D. maximize all of the feasible gains from international trade

9. The analyzes the income distribution effects of trade in the short run when resources are immobile among industries ?
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A. Stolpher-Samuelson theory

B. specific factors theory

C. factor endowment theory

D. overlapping demand theory

10. According to the Heckscher-Ohlin model ?
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A. The gainers from trade outnumber the losers from trade

B. The scarce factor necessarily gains from trade

C. None of the above

D. everyone automatically gains from trade

11. In his empirical tests, Wassily Leontief used an input-output table to ?
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A. calculate the labor productivity of America workers relative to foreign workers

B. calculate the capital and labor required to produce $1 million of U.S exports and imports

C. calculate the capital productivity of American capital relative to foreign capital

D. All of the above

12. Interindustry trade can be explained by all of the following except ?
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A. high per capita incomes in exporting countries

B. different growing seasons of the year for agricultural products

C. product differentiation for good such as automobiles

D. high transportation costs as a proportion of product value

13. The comparative advantage model of Ricardo was based on ?
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A. income conditions underlying specialization and trade

B. interindustry specialization and trade

C. demand conditions underlying specialization and trade

D. intraindustry specialization and trade

14. The factor endowment model of international trade was developed by ?
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A. David Ricardo

B. Eli Heckscher and Bertil Ohlin

C. Adam Smith

D. John Stuart Mill

15. Wassily Leontief used an input output table in order to test the ?
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A. Linder theory of overlapping demand

B. Heckscher Ohl in theory of comparative advantage

C. Ricardian theory of comparative advantage

D. All of the above

16. Which trade theory contends that a country that initially develops and exports a new product may eventually become an importer of it and may no longer manufacture the product ?
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A. Theory of factor endowments

B. Economies of scale theory

C. Product life cycle theory

D. Theory of overlapping demands

17. Declining costs per unit of output results from international trade especially if ?
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A. International trade affords producers monopoly power

B. National governments levy imports tariffs and quotas

C. Economies of scale exist for producers

D. Producing goods entails increasing costs

18. Leontiefs result were considered paradoxical because the United Stated was believed to be ?
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A. All of the above

B. technologically efficient relative to the rest of the world

C. labor abundant relative to the rest of the world

D. capital abundant relative to the rest of the world
19. By adjusting the model of comparative advantage to include transportation costs along with production costs we would expect ?
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A. specialization to stop when the production costs of the trading partners equalize

B. The gains from trade to be greater than when there are no transportation costs

C. The prices of trade goods to be lower than when there are no transportation costs

D. The volume of trade to be less than when there are no transportation costs
20. Wassily Leontiefs results can be interpreted as ?
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A. support for the Ricardian model

B. support for the Heckcher Ohlin model

C. evidence against the Heckscher-Ohl in model

D. evidence against the Ricardi an model