1. Trade In differentiated products refers to
A. intra industry trade
B. inter industry trade
C. trade based on economies of scale
D. non of the above
Answer
A. intra industry trade
2. The terms of trade of developing countries have a secular tendency to
A. improve
B. deteriorate
C. first improve and then deteriorate
D. remain the same
Answer
B. deteriorate
3. The opportunity cost theory assumes that
A. labour is the only factor of production
B. the price or the cost of a commodity can be determined by the labour content in it
C. labour is homogeneous
D. non of the above
Answer
D. non of the above
4. If a nation gains from trade its consumption point is
A. on the production possibility frontier (ppc
B. inside the ppc
C. above the ppc
D. any of the above
Answer
C. above the ppc
5. Given below is a table whowing the maximum amount of wheat and cloth that the UK and U S could produce if they fully utilize all the factors of production with the best technology available indicate the comparative advantage of U K and U S. U K U S Bushels of wheat 50 120 Meters of Cloth 150 80
A. us have comparative advantage in cloth and u k have comparative advantage in wheat
B. u k have comparative advantage in cloth and us have comparative advantage in wheat
C. us have comparative advantage in cloth and wheat
D. uk have comparative advantage in cloth wheat
Answer
A. us have comparative advantage in cloth and u k have comparative advantage in wheat
6. If a nations terms of trade is ½ its trade partners terms of trade is
A. 4
B. 2
C. 1
D. ½
Answer
B. 2
7. The H O theory postulates that as a result of trade the differences in factor pricesbetween nations
A. diminishes
B. increases
C. remains unchanged
D. any of the above
Answer
A. diminishes
8. Leontiff paradox refers to the result that the U S
A. exports are more capital intensive than imports
B. exports are more capital intensive than u s import substitutes
C. imports are more capital intensive than u s exports
D. import substitutes are more capital intensive than u s exports
Answer
D. import substitutes are more capital intensive than u s exports
9. The Exchange rate is kept the same in all parts of the market through
A. exchange rate arbiterage
B. interest arbiterage
C. hedging
D. speculation.
Answer
A. exchange rate arbiterage
10. Hedcging refers to
A. acceptance of foreign exchange risk
B. covering foreign exchange risk
C. foreign exchange speculation
D. foreign exchange arbiterage
Answer
B. covering foreign exchange risk
11. If { } > { } when K= capital and L= labour, and A and B are countries then
A. counry a is labour abundant
B. counry a is capital abundant
C. counry b is labour abundant
D. counry b is capital abundant
Answer
B. counry a is capital abundant
12. If { } > { } when K= capital and L= labour, and A and B are countries then
A. in counry a relative price of labour is low
B. in counry a relative price of capital is low
C. in counry b relative price of labour is low
D. non of the above
Answer
B. in counry a relative price of capital is low
13. In Autarchy a nations PPC also shows its
A. consumption function
B. sales frontier
C. profit frontier
D. factor endowment
Answer
A. consumption function
14. Opportunity cost theory
A. is anti thesis of recardian theory
B. is a synthesis of recardian and smiths theory
C. is a reconstruction of the recardian theory in terms of alternative cost.
D. non of the above
Answer
C. is a reconstruction of the recardian theory in terms of alternative cost.
15. The paradox that Growth can make a country worse off is termed as
A. leontiff paradox
B. rybezinsky theorem
C. immiserising growth
D. triffin dilemma
Answer
C. immiserising growth
16. “Free trade between two countries in H O model will equalize relative factor pricesprovided there is incomplete specialization.” This is
A. the factor price equalization theorem
B. rybezinsky theorem
C. leontiff paradox
D. cascading effect
Answer
A. the factor price equalization theorem
17. The absolute slope of a concave PPC is given by
A. internal equilibrium price ratio
B. the marginal rate of transformation
C. increasing returns to scale
D. all the above
Answer
B. the marginal rate of transformation
18. If { } > { } when K= capital and L= labour, Pk is price of capital and Pl is priceof labour and A and B are countries then
A. counry a is labour abundant
B. counry a is capital abundant
C. counry b is labour abundant
D. counry b is capital abundant
Answer
B. counry a is capital abundant
19. Devaluation works best when
A. it is accompanied by a decline in short term interest rate
B. foreign demad for exports is is elastic
C. demand for forign imports is inelastic
D. non of the above
Answer
B. foreign demad for exports is is elastic
20. BOP includes
A. current account
B. capital account
C. official reserve account
D. all the above
Answer
D. all the above
21. international trade refers to trade between
A. two regions of a country
B. two countries
C. two commodities produced in different countries
D. non of the above
Answer
B. two countries
22. The trade theory that states that nations should accumulate financial wealth, usuallyin the form of gold, by encouraging exports and discouraging imports is called
A. keynesianism
B. individualism
C. socialism
D. mercantilism.
Answer
D. mercantilism.
23. Which among the following are the central themes of Mercantilism?
A. export or perish.
B. strict focus on the wealth accumulation through protectionism.
C. no simultaneous gains or sharing of gains among countries are possible. one country can benefit only at the cost of other countries.
D. all the above.
Answer
D. all the above.
24. “An Enquiry in to the nature and causes of Wealth of Nations” is written by
A. j s mill
B. david recardo
C. karl marx
D. non of the above
Answer
D. non of the above
25. Adam Smith identified the basic reason for trade between two nations as
A. the difference in absolute advantage
B. the difference in comparative advantage
C. difference in factor endowments
D. non of the above.
Answer
A. the difference in absolute advantage
26. Theory of Absolute advantage is
A. a rejoinder of merchantalism
B. a corollary of merchantalism
C. critique of merchantalism
D. non of the above.
Answer
C. critique of merchantalism
27. The Absolute advantage theory indicates that a country should engage in theproduction and exchange of those commodities where it has
A. a comparative advantage
B. an absolute advantage
C. relative factor endowment
D. greater opportunity cost.
Answer
B. an absolute advantage
28. The ability to produce more of a good or service than competitors, using the sameamount of resources is
A. a comparative advantage
B. an absolute advantage
C. relative factor endowment
D. greater opportunity cost.
Answer
A. a comparative advantage
29. Which among the following are the major assumptions of Absolute advantagetheory?
A. there are two countries and two commodities and one country has absolute advantage in one commodity and the second country has advantage in another commodity.
B. labour is the only factor of production and labour is homogeneous, that means each unit of labour produces same level of output. value of a commodity is measured in terms of its labour content
C. labour is perfectly mobile within the country but perfectly immobile between the countries. it means that workers are free to move between industries within the nation but migration to other countries is impossible.
D. all the above.
Answer
D. all the above.
30. Absolute advantage theory assumes
A. no technological change.
B. no transportation cost
C. labour theory of value
D. all the above
Answer
D. all the above
31. The principle of comparative advantage was first introduced by
A. david ricardo
B. j s mill
C. adam smith
D. karl marx
Answer
A. david ricardo
32. The ability of a firm or individual to produce goods and/or services at a loweropportunity cost than other firms or individuals.
A. absolute advantage
B. opportunity cost
C. comparative advantage
D. non of the above.
Answer
C. comparative advantage
33. Major assumptions of the theory of Comparitive advantage are
A. there are two countries and two commodities and the countries have absolute advantage in both commodities.
B. labour is the only factor of production and labour is homogeneous, that means each unit of labour produces same level of output. value of a commodity is measured in terms of its labour content
C. labour is perfectly mobile within the country but perfectly immobile between the countries. it means that workers are free to move between industries within the nation but migration to other countries is impossible.
D. all the above.
Answer
D. all the above.
34. The ‘Reciprocal Demand Theory’ in International Trade can be attributed to
A. adam smith
B. david recardo
C. j s mill
D. karl marx
Answer
C. j s mill
35. The curve that shows howmuch of its import commodity a nation requires inexchange for various quantities of its export commodity is
A. demand curve
B. laffer curve
C. phillips curev
D. offer curev
Answer
D. offer curev
36. Reciprocal Demand Curve is another name for
A. demand curve
B. laffer curve
C. phillips curev
D. offer curev
Answer
D. offer curev
37. The Reciprocal Demand theory was put into graphic form by
A. adam smith
B. david recardo
C. alfred marshall and f.y. edgeworth
D. non of the above
Answer
C. alfred marshall and f.y. edgeworth
38. The amount of commodity a nation is willing to give up to get an additional unit ofanother commodity and still remain on the same indifference curve is known as
A. marginal rate of substitution
B. marginal rate of transformation
C. marginal product
D. non of the above
Answer
A. marginal rate of substitution
39. ___ theory states that countries which are rich in labour will export labour intensive goods and countries which are rich in capital will export capital intensivegoods
A. the heckscher ohlin theorem
B. stolper samuelson theorem
C. leontiff paradox
D. rybezensky theorem.
Answer
A. the heckscher ohlin theorem
40. Which among the following is NOT an assumption of H-O Theorem
A. there are two countries involved. each country has two factors (labour andcapital) and produce two commodities either labour intensively or capital intensively.
B. there is no perfect competition in both commodity and factor markets. all production functions are hertogenious. production function is subject to increasing or decreasing returns to scale.
C. there are no transportation costs.
D. factors are freely mobile within a country but immobile between countries.
Answer
B. there is no perfect competition in both commodity and factor markets. all production functions are hertogenious. production function is subject to increasing or decreasing returns to scale.
