International Trade (IT)

MCQs

1. International product price differences arise due to difference in

(A) supply conditions

(B) demand conditions

(D) all of the above

2. The principle of comparative cost is based on

(A) The differences in production costs of similar commodities in different countries,

(B) These differences are due to differences in geographical division of labor and

(D) All the above reasons are correct

3. Which of these statements is correct?

(A) If the marginal opportunity costs in production are constant, the PPC will concave to the origin

(B) If the marginal opportunity costs in production are constant, the PPC will be I shaped

(D) If the marginal opportunity Costs in production are decreasing, the PPC will be convex to the origin

4. The factor price ratio in country A is 2 while it is 0.6 in the case of country B. (labor is measured along horizontal axis while capital is measured along vertical axis).

(A) country B is labour abundant

(B) country A is capital abundant

(D) country A is labour abundant

5. Between two countries, capital intensive product is that one in which with the same amount of capital we combine

(A) Cheap labour

(B) More labour

(C) Less labour

(D) No labour

6. As per Ricardian model of international trade, developing countries produce primary products and developed countries produce non - primary products because of

(A) absolute disadvantage to developed countries

(B) absolute cost disadvantage to developing countries

(D) the least comparative disadvantage to developing countries

7. Given Absolute cost differences, which of the following country has advantage in the production of X & Y commodities?

Country Commodity-X Commodity-Y

A 10 5

B 5 10

(A) 10x A / 5x B > 5yA / 10yB

(B) Country A has Absolute advantage in the production of X and Country B has Absolute advantage in the production of Y

(C) Both A & B are correct

(D) None of the Above

8. Which of these statements is correct?

(A) If the offer of country A in term is of it's exportable to country B increases, the ToT will move in favour of country B, keeping other thing constant.

(B) If the offer of country A in terms of it's exportable to country B increases, the terms of trade will move in favour of country A, keeping other things constant.

(C) If the offer of country A in terms of it's exportable to country B decreases, the terms of trade will move in favour of country B, keeping other things constant.

(D) If the offer of country A in terms of it's exportable to country B remains the same, terms of trade will move in favour of country B, keeping other things constant.

9. Paul Krugman developed the new theory of international trade using theoretical development from

(A) Market structure

(B) Microeconomics

(C) Both microeconomics & market structure

(D) None of the above

10. According to the factor proportions model, countries have comparative advantage in the good that _______.

(A) Employs a relatively small amount of the factor that they have relatively more of than other countries.

(B) Employs a relatively large amount of their scarce factor.

(D) None of the above

11. The H-O Theorem will be invalid in case:

(A) The production and consumption biases are in one direction

(B) In case production possibility curves of both countries are convex to origin

(D) The production and consumption biases are in opposite directions

12. The international rate of exchange will be settled within the to limits of domestic exchange ratios, depending upon the

(A) size of the country

(B) policies of the government

(D) intensity of reciprocal demand

13. The more inelastic the offer curve of a country, the more_______.

(A) favorable terms of trade

(B) unfavorable terms of Trade

(D) free trade

14. If the iso-cost of a country is steeper, given that capital is measured on Y-axis and labor on X-axis, it implies that

(A) labor is relatively cheaper

(B) the country is capital abundant

(D) the country is labor abundant

15. According to the new trade theory, external economies of scale lead to creation of market structure which becomes a base for the industry to specialization in the sector and export the product.

(A) Purely competitive

(B) Monopolistic

(C) Monopolistically competitive

(D) Perfectly competitive

16. If in a country labor is relatively costlier than capital as compare to another country, then the country is termed as

(A) capital scare country

(B) labor scare country

(D) none of the above

17. The domestic exchange ratios are as follows: Country A 1 unit of X= 6 unit of Y and Country B 1 unit of X = .9 unit of Y If the international exchange ratio is 1 unit of =.75 unit of Y, then

(A) no gains to B

(b) equal gains to A and B

(C) country A gains more

(d) country B gains more

18. As per the price criteria of factor abundance,

(A) If the PK/PL ratio of a country is relatively lower, it is a capital abundant country

(B) If the PK/PL ratio of a country is relatively higher, it is a labor scarce country

(d) If the PK/PL ratio of a country is relatively higher, it is a capital abundant country

19. In classical trade theory's production cost consists of

(A) labor cost

(B) marginal cost

(D) material cost

20. A downward sloping straight line production possibilities indicates_____ opportunity cost

(A) constant

(B) increasing

(D) decreasing

21. Which theory assumes that production functions are different for different commodities but are the same for each commodity in both countries?

(A) J.S. Mill

(B) Heckscher-Ohlin

(D) Adam Smith

22. Krugman‘s, new trade theory explain:

(A) Natural differences in resources and climate

(B) Static condition of trade

(C) Positive Network effects

(D) Comparative costs advantage from trade

23. If country A can produce either 120 units of good X or 120 units of good Y with its resources, while country B can produce 40 units of good X or 80 units of good Y with its resources, then which of the following, follows

(A) the ToT between the two countries for the two products will most likely lie between 0.5:1 and 1:1

(B) the ToT between the two countries for the two products will most likely lie between 1:2 and 2:5

(D) the ToT between the two countries for the two products will most likely lie between 1:1 and 1:2

24. Identity the odd one out

(A) Absolute cost advantage of each country in different commodities

(B) Constant returns to scale

(C) intra industry trade

(D) Labor theory of value

25. Haberler‘s theory of opportunity cost, represented by________.

(A) Production possibility curves

(B) Indifference curve

(D) Iso-quants

26. External economies relate to

(A) monopolies

(B) many small competitive firms

(D) imperfect markets

27. The actual terms of trade of a country can only be established if we know the / weather

(A) goods are capital or labor-intensive

(B) size of two trading countries

(C) offer curve of the other country

(D) elasticity of domestic demand in the trading countries

28. As opposed to autarky, the outcome of international trade is the equalization of products prices and _______.

(A) export prices

(B) imports and exports

(C) factor prices

(D) Imports prices

29. International trade would benefit the whole world as it

(A) results into equity

(B) improves efficiency

(D) all of the above

30. International trade in goods and services, sometimes used as a substitute for all the following except international movements of

(A) capital

(B) technology

(D) labor

Top Mcqs: International Trade

International Trade (IT)

MCQs