121. The Heckscher-Ohlin model rules out the classical model’s basis for trade by assuming that ___ is (are) identical between countries.
A. Factor endowments
B. Factor intensities
C. Technology
D. Opportunity costs
Answer
C. Technology
122. According to the Heckscher-Ohlin model
A. Everyone automatically gains from trade
B. The gainers from trade outnumber the losers from trade
C. The scarce factor necessarily gains from trade
D. None of the above
Answer
B. The gainers from trade outnumber the losers from trade
123. Countries H and F operate in an H-O world. Each country produces two goods, A and B. Good A is relatively capital intensive and country F is relatively labor abundant. Suppose however, that the production technology is not the same in the two countries. That is, H has a superior technology of production compared to F.
A. Free trade will equalize wages between the two countries
B. In free trade, there will be no incentive for migration of labor from H to F.
C. In free trade there will be some incentive for workers from F to migrate to H.
D. Both b. and c.
Answer
D. Both b. and c.
124. According to the Heckscher – Ohlin model, if the United States is richly endowed in human capital relative to Mexico, then as NAFTA increasingly leads to more bilateral free trade between the two countries,
A. The United States will find its industrial base sucked into Mexico
B. Mexico will find its relatively highly skilled workers drawn to the United States
C. The wages of highly skilled U.S. workers will be drawn down to Mexican levels
D. The wages of highly skilled Mexican workers will rise to those in the United States.
Answer
D. The wages of highly skilled Mexican workers will rise to those in the United States.
125. In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border would
A. Moves the point of production along the production possibility curve
B. Shifts the production possibility curve outward, and increase the production of both good
C. Shift the production possibility curve outward and decrease the production of the Labor-intensive product
D. Shift the production possibility curve outward and decrease the production of the capital-intensive product.
Answer
D. Shift the production possibility curve outward and decrease the production of the capital-intensive product.
126. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A. Tastes
B. Military capabilities
C. Size
D. Relative availabilities of factors of production
Answer
D. Relative availabilities of factors of production
127. According to the Heckscher-Ohlin model, the source of comparative advantageis a country’s
A. Technology
B. Advertising.
C. Factor endowments
D. Both A and B.
Answer
C. Factor endowments
128. One way in which the Heckscher-Ohlin model differs from the Ricardo model of comparative advantage is by assuming that ___ is (are) identical in all countries.
A. Factor of production endowments
B. Scale economies
C. Factor of production intensities
D. Technology
Answer
D. Technology
129. The Heckscher-Ohlin model assumes that ___ are identical in all trading countries
A. Gross domestic product
B. Technologies
C. Factor endowments
D. Both A. and B
Answer
B. Technologies
130. As opposed to the Ricardian model of comparative advantage, the assumption of diminishing returns in the Heckscher-Ohlin model means that the probability is greater that with trade
A. Countries will not be fully specialized in one product
B. Countries will benefit from free international trade.
C. Countries will consume outside their production possibility frontier.
D. Comparative advantage is primarily supply related.
Answer
A. Countries will not be fully specialized in one product
131. Which of the following is false (for the Heckscher-Ohlin model)?
A. Differences in technologies could be the source of gains from trade
B. Some groups may gain and some may lose due to trade
C. Gains for the trade-related winners will tend to be larger than losses of losers.
D. None of the above.
Answer
A. Differences in technologies could be the source of gains from trade
132. If a commodity is classified as “labor-intensive” at one set of relative factor prices but “capital-intensive” at another set of relative prices, this situation is known as
A. demand reversal.
B. factor-intensity reversal.
C. balance of payment reversal
D. factor price reversal
Answer
B. factor-intensity reversal.
133. If relatively capital-abundant country A opens trade with relatively labor- abundant country B an the trade takes place in accordance with the Heckscher-Ohlin Theorem. What would be the consequence for factor prices (w/r) in the two countries?
A. (w/r) rises in A and falls in B
B. (w/r) rises in A and also rises in B
C. (w/r) falls in A and rises in B
D. (w/r) falls in A and also falls in B
Answer
C. (w/r) falls in A and rises in B
134. An implication of the Heckscher-Ohlin Theorem is that
A. if two countries have identical tsetse, then no trade will occur between them.
B. the relative price of a country’s scarce factor of production will rise when the country is opened to trade.
C. income distribution in a country does not change when a country is opened to trade.
D. two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if the factor intensities of the commodities differ.
Answer
D. two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if the factor intensities of the commodities differ.
135. Theory of comparative advantage was presented by:
A. Adam Smith
B. Ricardo
C. Hicks
D. Arshad
Answer
B. Ricardo
136. Which of the following is international trade:
A. Trade between provinces
B. Trade between regions
C. Trade between countries
D. (b) and (c) of above
Answer
C. Trade between countries
137. Which is NOT an advantage of international trade:
A. Export of surplus production
B. Import of defence material
C. Dependence on foreign countries
D. Availability of cheap raw materials
Answer
C. Dependence on foreign countries
138. Trade between two countries can be useful if cost ratios of goods are:
A. Equal
B. Different
C. Undetermined
D. Decreasing
Answer
B. Different
139. Modern theory of international trade is based n the views of:
A. Robbins and Ricardo
B. Adam Smith and Marshall
C. Heckcsher and Ohlin
D. Saleem and Kareem
Answer
C. Heckcsher and Ohlin
140. Foreign trade creates among countries:
A. Conflicts
B. Cooperation
C. Hatred
D. Both (a) & (b)
Answer
B. Cooperation
141. Net exports equal:
A. Exports x Imports
B. Exports + Imports
C. Exports – Imports
D. Exports of services only
Answer
C. Exports – Imports
142. If Japan and Pakistan start free trade, difference in wages in two countries will:
A. Increase
B. Decrease
C. No effect
D. Double
Answer
B. Decrease
143. According to Hecksher and Ohlin basic cause of international trade is:
A. Difference in factor endowments
B. Difference in markets
C. Difference in political systems
D. Difference in ideology
Answer
A. Difference in factor endowments
144. All are advantages of foreign trade EXCEPT:
A. People get foreign exchange
B. Nations compete
C. Cheaper goods
D. Optimum utilisation of country’s resources
Answer
A. People get foreign exchange
145. A primary reason why nations conduct international trade is because:
A. Some nations prefer to produce one thing while others produce another
B. Resources are not equally distributed to all trading nations
C. Trade enhances opportunities to accumulate profits
D. Interest rates are not identical in all trading nations
Answer
B. Resources are not equally distributed to all trading nations
146. A main advantage of specialization results from:
A. Economics of large scale production
B. The specializing country behaving as a monopoly
C. Smaller production runs resulting in lower unit costs.
D. High wages paid to foreign workers
Answer
A. Economics of large scale production
147. International trade in goods and services is sometimes used as a substitute for all of the following except:
A. International movements of capital.
B. International movements of labor.
C. International movements of technology
D. Domestic production of different goods and services
Answer
D. Domestic production of different goods and services
148. If a nation has an open economy it means that the nation:
A. Allows private ownership of capital.
B. Has flexible exchange rates
C. Has fixed exchange rates
D. Conducts trade with other countries
Answer
D. Conducts trade with other countries
149. International trade forces domestic firms to become more competitive in terms of:
A. The introduction of new products
B. Product design and quality
C. Product price
D. All of the above
Answer
D. All of the above
150. The movement to free international trade is most likely to generate short-term unemployment in which industries:
A. Industries in which there are neither imports nor exports
B. Import-competing industries.
C. Industries that sell to domestic and foreign buyers
D. Industries that sell to only foreign buyers
Answer
B. Import-competing industries.
151. International trade is based on the idea that:
A. Exports should exceed imports
B. Imports should exceed exports
C. Resources are more mobile internationally than are goods
D. Resources are less mobile internationally than are goods
Answer
D. Resources are less mobile internationally than are goods
152. Arguments for free trade are sometimes disregarded by politicians because:
A. Maximizing domestic efficiency is not considered important
B. Maximizing consumer welfare may not be a chief priority
C. There exist sound economic reasons for keeping one’s economy isolated from other economies.
D. Economists tend to favor highly protected domestic markets
Answer
B. Maximizing consumer welfare may not be a chief priority
153. Increased foreign competition tend to
A. Intensify inflationary pressure at home
B. Induce falling output per worker-hour for domestic workers
C. Place constraints on the wages of domestic workers
D. Increase profits of domestic import-competing industrie
Answer
C. Place constraints on the wages of domestic workers
154. Free trade is based on the principle of:
A. Comparative advantage
B. Comparative scale
C. Economies of advantage
D. Production possibility advantage
Answer
B. Comparative scale
155. In 2003, the US had the largest total amount of imports from and exports to
A. China.
B. Mexico.
C. Canada.
D. Germany.
Answer
C. Canada.
156. Evidence shows that
A. the effect of borders is not important when comparing international trade with trade between regions within a country.
B. the amount of trade that a country undertakes is not related to its geography.
C. the amount of trade between countries is not related to the cultural affinity between the countries.
D. countries farther apart have less trade between them on average.
Answer
D. countries farther apart have less trade between them on average.
157. The North American Free Trade Agreement
A. has reduced the usefulness of the gravity model.
B. has shown that international borders no longer affect the amount of trade between countries.
C. has reduced tariffs and other trade restrictions among British Columbia, Manitoba and Ontario.
D. has reduced tariffs and other trade restrictions among Canada, Mexico and the US.
Answer
D. has reduced tariffs and other trade restrictions among Canada, Mexico and the US.
158. While technologies have reduced the negative effect that distance has on trade,
A. the effect of international borders has not been reduced through trade agreements.
B. the effects of the Internet and airplanes on trade have been negligible.
C. political factors have historically been more influential in determining the amount of trade than available technologies.
D. cultural clashes have recently reduced the amount of US trade compared to US trade in 1950.
Answer
C. political factors have historically been more influential in determining the amount of trade than available technologies.
159. Most international trade today is classified as trade in
A. Agricultural products
B. Services
C. Manufactured products
D. Dairy products
Answer
C. Manufactured products
160. Approximately what percent of US imports occur through transactions conducted by amultinational corporation?
A. 5%
B. 10%
C. 25%
D. 40%
Answer
D. 40%
