Deck 6: International Trade Theories and Concepts

Question 1

According to Classical economists, -------is the reason for a country to specialie in the production of a commodity

A)Internalisation
B)Cost differences
C)International Division of labor
D)Special Commodities

Answer 1

International Division of labor

Question 2

International trade is the result of an advantage country possesses in producing a particular commodity at a -------         

A)Lower Cost
B)Equal cost
C)Higher cost
D)Constant Cost

Answer 2

Lower Cost

Question 3

Absolute difference in Cost is explained by         

A)David Ricardo
B)Adam Smith
C)J.S.Mill
D)Alfred Marshall

Answer 3

Adam Smith

Question 4

According to Adam Smith, international trade is advantageous for all participating countries only if they enjoy -------difference in cost of production

A)Comparative
B)Equal
C)Absolute
D)Unequal

Question 5

Who aid the following, " The esence of international trade is not the absolute difference in cost but a comparative difference in cost."

A)Adam Smith
B)David Ricardo
C)J.S.Mill
D)Alfred Marshall

Question 6

Ricardian theory has -------countries and           commodities

A)32
B)23
C)24
D)22

Question 7

Which of the following is NOT an assumption of Comparative Cost Advantage Theory?

A)Perfect Competition
B)Increasing return to scale
C)Perfect Mobility of labor within countries
D)Homogenoeus labor

Question 8

Comparative Advantage is expressed in -------     

A)Absolute Cost
B)Variable cost
C)Cost ratios
D)Marginal Cost

Question 9

England 1 unit wine =1/2unit cloth, Portugal 1 unit wine = 1 unit cloth. This is an example of

A)Comparative Cost
B)Absolute Cost
C)Relative Cost
D)Unequal Cost

Question 10

Comparative Advantage theory is based on -------value

A)Cost theory
B)Productivity theory
C)Quality theory
D)labor theory

Question 11

No change in technology, no transport cost, constant returns to scale - these assumptions make the Comparative Cost advantage theory     -------

A)Dynamic
B)Redundant
C)Static
D)Unacceptable

Question 12

If a country enjoys an absolute advantage in the production of all commodities then also trade is possible". Who said this?

A)Adam Smith
B)David Ricardo
C)J.S.Mill
D)Alfred Marshall

Question 13

According to H-O theory, International trade is, but a pecial case of -------trade.

A)Inter-state
B)Intra state
C)Intra-Country
D)Inter-regional

Question 14

H-o Theory s based on value theory.

A)Partial
B)Semi-partial
C)General
D)Semi-General

Question 15

H-O Theory is a -------model

A)1 X 1 X 1
B)2 X 2 X 2
C)3 X 3 X 3
D)4 X 4 X 4

Question 16

Commodity Y is Capital intensive if -------

A)Ky / Ly = Kx / Lx
B)Ky / Ly < Kx /Lx
C)Ky /Ly > Kx / Lx
D)Ky > Kx

Question 17

If,England 1 wine = 1/2 cloth and if Portugal 1 wine = 1 cloth, this I an example of

A)Comparative advantage
B)Absolute Advantage
C)Similar Cost
D)Unequal Cost

Question 18

If Commodity Y requres 2 units of capital and 2 units of labor and commodity X requires 1 unit of capital and 4 units of labor then Y is

A)Labor intenive
B)Labor specific
C)Capital Intensive
D)Capital Specific

Question 19

Factor intensity is measured in -------terms

A)Absolute Cost
B)Factor ratios
C)Relative Cost
D)Frequency of capital labor

Question 20

Total amount of labor in Nation 1 is greater than labor in nation 2 if

A)TK1 /TL1 > TK2 /TL2
B)TK1 / TL1 < TK2 /TL2
C)TK1 /TL1 = TK2/TL2
D)TL1 > TL2

Question 21

Factor abundance can be explained using

A)Demand curve
B)Supply curve
C)Tangent
D)PPC

Question 22

A nation is capital abundant if

A)PK1/PL1 < PK2/PL2
B)PK1/PL1 >PK2/PL2
C)PK1/PL1 = PK2/PL2
D)PK1 < PK2

Question 23

Abundance of a factor makes it

A)Easy
B)More
C)Expensive
D)Cheap

Question 24

r1 / w1 < r2 / w2 means

A)Nation 1 is capital abundant
B)Nation 1 is labor abundant
C)Nation 2 is capital abundant
D)Nation 2 has high wages

Question 25

The rate at which goods are exchangeed between two countries is called

A)Import price
B)Export rate
C)Foreign exchange
D)Terms of trade