International Trade
(IT)
MCQs
1. The Terms of Trade are
(a) duration of time two countries have been trading
(b) the autarky of equilibrium
(c) the exchange rate of two goods
(d) The production possibilities curve of trading nations
2. Autarky means :
(a) self-sufficiency of nation
(b) equilibrium with maximum gains from international trade
(c) factors affecting ToT
(d) high standard of living
3. Which trade theory holds that a nation can increase their economic well-being by specializing in production of goods they produce more efficiently than anyone else?
(a) The factor endowment theory
(b) The theory of comparative advantage
(c) The international product life cycle theory
(d) The theory of absolute cost advantage
4. Which theory holds that nations should produce those goods in which it has the greatest relative advantage?
(a) The factor endowment theory
(b) the theory of absolute cost advantage
(c) The theory of relative advantage
(d) None of the above
5. Over the time, the economic interdependence of nations has
(a) Diminished
(b) remained unchanged
(c) Grown
(d) cannot say
6. International trade theory refers to
(a) The microeconomic aspects of International trade
(b) The macroeconomic aspects of international trade
(c) The international finance
(d) The open economy macroeconomics
7. Which of the following is not an assumption generally made in the study of international trade theory?
(a) Two nations
(b) Two commodities
(c) Perfect international mobility of factors
(d) Two factors of production
8. The economist, namely ________, received Nobel Prize for his theory of international trade.
(a) Adam Smith
(b) Paul Krugman
(c) Dr. Manmohan Singh
(d) Heckscher-Ohlin
9. At equilibrium, Heckscher-Ohlin model hypothesizes……….
(a) Equal advantages to trading nations
(b) factors price equalization
(c) Equality of factors in use
(d) None of the above
10. Expansion of international trade volume and thereby globalization has tended to reduce the price of manufactured goods over the past decades. As a result___________
(a) Developed countries advantage is falling
(b) Developing countries disadvantage is rising
(c) International inequality is widening
(d) None of the above
11. A country gains more from trade if the international exchange rate is towards _________.
(a) Domestic cost ratio of home country
(b) Domestic exchange ratio of foreign country
(c) At the lower cost of production
(d) cannot say
12. According to net barter terms of trade, a nation will gain if it‘s__________.
(a) Export demand is perfectly elastic
(b) Import demand is elastic
(c) Export demand is inelastic
(d) Import demand is inelastic
13. Intra-industry trade refers to the trade in___________products.
(a) Identical
(b) Complementary
(c) Differentiated
(d) Non-related
14. _________ is a valid assumption of absolute & comparative advantage theory
(a) Full Employment
(b) Process Technology
(c) Product technology
(d) Competitive technology
15. The commodity terms of trade takes into account
(a) Quantity Index
(b) Price Index
(c) Ratio of price indices of imports to exports
(d) Ratio of price indices of export to imports
16. New Trade Theory emphasizes on
(a) Economies of Scale
(b) Imperfect competition
(c) Differentiated Products
(d) All of the above
17. Economic Welfare of a country will be maximized when commodity terms of trade are ________.
(a) Minimized
(b) Maximized
(c) Optimized
(d) Constant
18. When there is increase in both the export price index & import price index by the same percentage, commodity terms of trade will
(a) Improve
(b) Remain unchanged
(c) Deteriorate
(d) None of the above
19. The improvement in the value of gross barter terms of trade is expressed by
(a) Decrease in the Export Quantity Index
(b) Increase in the Import Quantity Index
(c) Decrease in the Import Quantity Index
(d) None of the above
20. The Value of the commodity terms of trade index remains unchanged in case of...
(a) The export price index is greater than import price index
(b) The change in export price index and the import pace index in the same percentage
(c) The export price index is lower than import price index
(d) None of the above
21. When the country‘s net and gross barter terms of trade are equal...
(a) Balance of trade is in equilibrium
(b) Balance of payment in equilibrium
(c) Both (a) & (b)
(d) None of the above
22. As a result of imposition of tariff, i nation‘s offer curve will...
(a) Shift towards axis measuring imports
(b) Remain unaffected
(c) Shift towards axis measuring exports
(d) None of the above
23. The gross barter and commodity terms of trade are equal when_______.
(a) There is surplus in balance of trade
(b) There is deficit in balance of trade
(c) There is equilibrium in balance of trade
(d) None of the above
24. The offer curve of a nation bulges towards the axis that measures its
(a) Export commodity
(b) Import commodity
(c) Export-Import commodity
(d) Non Traded commodity
25. According to theory of comparative costs, there are ________ types of cost differences
(a) One
(b) Two
(c) Three
(d) No Specified
26. The terms of trade _________.
(a) Measures relative prices in the importing country
(b) Measure relative prices in the exporting country
(c) Measure the volume of exports
(d) Measure how many units of goods must be given up for each unit received in trade by a trading count.
27. International and interregional trade differ primarily because
(a) Comparative advantage is relevant to the former but not to the latter
(b) Comparative advantage is relevant to the latter but not to the former
(c) Commodities flow across national boundaries
(d) Resources supplies vary as between different nations of the world
28. Foreign trade helps each country to make ________ use of its natural resources.
(a) Optimal
(b) Less
(C) Better
(d) None of these
29. Purchase of goods from one country with the object of selling than to another country is called — trade.
(a) Import
(b) Export
(c) Enterport
(d) Indian
30. USA should import according to H -O theory
(a) Capital intensive goods
(b) Labor intensive goods
(c) Both (a) & (b)
(d) None of the above
31. Imposition of tariff will lead to_
(a) Improvement in terms of trade
(b) Deterioration in terms of trade
(c) No effect on terms of trade
(d) Both (a) & (b)
32. The shape of the offer curve is determined by ________.
(a) Supply conditions
(b) Demand conditions
(c) Both (a) & (b)
(d) None of the above
33. Offer curve was developed by________.
(a) David Ricardo
(b) J.M.Keynes
(c) A. Pigou
(d) None of the above
34. According to Hecksher-Ohlin theory, production function of different countries for the same product is —
(a) Same
(b) Different
(c) Either (a) or (b)
(d) None of the above
35. The concept of income terns of trade was first formulated by
(a) G. S. Dorrance
(b) Jacobviner
(c) Taussing
(d) J. S. Mill
36. Ricardo‘s Law of comparative advantage is based on_________.
(a) The opportunity cost theory
(b) The labor theory of value
(c) The law of diminishing returns
(d) All of the above
37. In the Heckscher- Ohlin model, international trade is based mostly on a difference in
(a) technology
(b) Product differentiation
(c) economies of Sale
(d) Factor endowments
38. Ricardo explained the law of comparative advantage on the basis of
(a) opportunity costs
(b) The law of diminishing returns
(c) demand & supply theory
(d) the labor theory of value
39. A country‘s N terms of trade is the ratio of
(a) the quantity of its exports to the quantity of its imports
(b) the value's exports to the value of its imports
(c) index of its export prices to index of its import prices, multiplied by 100
(d) domestic prices to international paces, multiplied by 100
40. In a two country — good world, each country will have a comparative advantage in a different good, and this will term the basis for
(a) competition
(b) Specialization
(c) proportionate gains
(d) autarky of trade
41. When ToT is set closer to the domestic exchange ratio of the opposite nation the gain will accrue to
(a) home nation
(b) Foreign nation
(c) both the nations
(d) none of the above
42. Paul krugman is credited with the
(a) factor proportion theory
(b) new trade theory
(c) law of factor price equalization
(d) product life cycle theory
43. According to the factor proportions model, countries have comparative advantage in the good that
(a) employs a relatively large amount of their scarce, factor.
(b) employs a relatively large amount of the factor that they have relatively more of, than other countries.
(c) uses intensively their scarce factor.
(d) requires proportionately more of every factor than the good they import
44. India should import according to H.O. theory
(a) Capital intensive goods
(b) Labor intensive goods
(c) Both (a) & (b)
(d) None of the above
45. With imposition of tariff, country‘s terms of trade will
(a) remain unchanged
(b) Improve
(c) Deteriorate
(d) Either(b) or (c)
46. The shape of the offer curve is
(a) Linear
(b) Non-Linear
(c) Straight Line
(d) None of the above
47. The commodity in which a nation has the least absolute disadvantage represents its area of
(a) Comparative disadvantage
(b) Comparative advantage
(c) Absolute advantage
(d) cannot say
48. According to Leontief, U S A exports
(a) Capital intensive goods
(b) Labor intensive goods
(c) Both (a) & (b)
(d) None of the above
49. Factor reversal matters when
(a) Factor endowments are similar
(b) Factor endowments differ significantly
(c) Factor price are same
(d) None of the above
50. India should export according to H.O theory
(a) Capital intensive goods
(b) Labor intensive goods
(c) Both (a) & (b)
(d) None of the above
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