Foundations Of Modern Trade Theory MCQs

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Correct options are highlighted when revealed.

1.According to G. MecDougall's research, what relationship did he find between labor productivity and export ratios?

Higher U.S. labor productivity correlated with increased U.K. export proportionsGreater U.K. labor productivity corresponded with higher U.K. export ratiosThere was no correlation between labor productivity and export ratiosNone of the stated options are correct

2.Which of the following factors can contribute to dynamic gains from trade?

Increased investment activity triggered by market liberalizationCost advantages achieved through large-scale production after markets openEnhanced competition enabled by the removal of trade barriersAll of the aboveNone of the above

3.Under conditions of free trade, when would Canada fail to gain any benefits from trading with Sweden?

Engages in trade at Canada's marginal rate of transformationTrades according to Sweden's marginal rate of transformationFully specializes in producing its export commodityPartially specializes in manufacturing its export products

4.In a self-sufficient economy, where does the production point lie when the community optimizes its living standards?

Inside the production possibility curveExactly on the production possibility curveBeyond the production possibility curveIndeterminate without additional details

5.In an economy, when a society achieves the highest possible standard of living, where is its production and consumption point located?

Inside the production possibility curveExactly on the production possibility curveBeyond the production possibility curveCannot determine without additional data

6.Between 1990 and 2000, which pair of countries experienced an improvement in their terms of trade?

Denmark and MexicoDenmark and SwedenSpain and SwedenSweden and Mexico

7.When a nation's production possibilities frontier is a straight line sloping downward, what type of opportunity costs does it indicate?

constant opportunity costsdeclining opportunity costsinitially rising then falling opportunity costsrising opportunity costsvariable opportunity costs

8.What happens to the budget line when the relative price (MRT) of T rises?

Move outward without changing slopeMove inward without changing slopeBecome more steeply inclinedBecome less steep

9.What is the marginal rate of transformation (MRT) of good T expressed in terms of good S?

20.55001000

11.What is the relative price of one unit of wine expressed in terms of beer in Country B when it is self-sufficient?

One unit of wine equals three units of beerOne unit of wine equals four and a half units of beerOne unit of wine equals five units of beerOne unit of wine equals six units of beer

12.In which product does Country A hold an absolute advantage?

BeerWineBoth Beer and WineNeither Beer nor Wine

13.If two countries engage in trade based on their comparative advantages, what would Country A export to Country B?

Country A would send product X to Country BCountry A would send product Y to Country BBoth countries would refrain from tradingNone of these choices are correct

14.In which product does Country B hold an absolute advantage?

Product XProduct YNeither Product X nor Product YBoth Product X and Product Y

15.What factor determines comparative advantage between nations?

Absolute variations in labor efficiency among countriesProportional differences in labor productivity across countriesA combination of both absolute and proportional productivity differencesNeither absolute nor proportional productivity differences

16.According to Ricardo's classical theory, what primarily determines the pattern of international trade?

17.What primarily determines the benefits a country gains from engaging in international trade?

The principle of labor value theoryThe extent to which the autarky price deviates from the global terms of tradeThe assumption that a nation inevitably suffers losses from tradeEvery statement mentioned above

18.What best describes the mercantilist economic system?

It advocates for unrestricted global trade.It involves government policies that encourage exports and restrict imports.It was highly endorsed by Adam Smith in his book Wealth of Nations.Both options A and C are correct.None of the above.

19.When the international trade terms fall between the opportunity costs of two countries, what is the outcome?

Neither country benefits from tradingBoth nations experience advantages from tradeOnly a single country benefits from tradingOne country benefits while the other suffers losses