Question 1

The main reason for different nations to enter into trade is that

Accepted Answer

A)  Every nation can produce by itself all the commodities and services required by its citizens/people
B)  Some nations are capable to produce all the goods and services required by its people
C)  No country has the capacity to produce all the goods and services required by its citizens/people
D)  None of the aboveE) All of the above
F) A) and D)

Question 2

The fundamental reason why different countries involve in transactions with one another is the

Accepted Answer

A)  Theory of absolute differences in costs
B)  Production of goods
C)  Gains from trade
D)  Supply of goodsE) None of the above
F) B) and C)

Question 3

The opportunity cost theory considers

Accepted Answer

A)  Labour as the only factor of production
B)  Capital as the only factor of production
C)  Both labour and capital
D)  Land, labour and capitalE) A) and C)
F) C) and D)

Question 4

The Comparative theory of international trade is based on

Accepted Answer

A)  Constant costs
B)  Variable costs
C)  Increasing costs
D)  Decreasing costsE) B) and D)
F) A) and C)

Question 5

The production possibility curve represents

Accepted Answer

A)  The supply side
B)  The demand side
C)  Combination of four commodities
D)  None of the aboveE) None of the above
F) A) and C) A

Question 6

The difference in the domestic cost ratios of producing two commodities in two countries is known as

Accepted Answer

A)  Actual gains
B)  Partial gains
C)  Potential gains
D)  Price gainsE) A) and D)
F) A) and C)

Question 7

The slope of the production possibility curve under Opportunity costs theory is also called

Accepted Answer

A)  The average production curve
B)  Marginal rate of transformation
C)  Indifference curve
D)  Isoquant curveE) A) and B)
F) C) and D)

Question 8

Which factor does not influence terms of trade?

Accepted Answer

A)  Devaluation
B)  Overpopulation
C)  Trade policy
D)  ImmigrationE) B) and C)
F) A) and B) D

Question 9

The income terms of trade is

Accepted Answer

A)  The net barter terms of trade of a country multiplied by its export volume index
B)  The ratio between the quantities of a country's imports and exports
C)  The ratio between the price of a country's export goods and import goods
D)  None of the aboveE) C) and D)
F) B) and C) A

Question 10

The H-O theory assumed the prevalence of

Accepted Answer

A)  Monopolistic forms of market
B)  Perfect competition
C)  Oligopolistic forms of market
D)  MonopolyE) All of the above
F) A) and B)

Question 11

Relative factor abundance in H-O theory of trade can be defined in terms of

Accepted Answer

A)  The physical & price criterion of relative factor abundance(and the price criterion of relative factor abundance
B)  Perfect mobility of factors of production
C)  Production governed by increasing returns to scale
D)  Similar factor intensitiesE) B) and C)
F) B) and D)

Question 12

Community indifference curves have the same characteristics as

Accepted Answer

A)  Transformation curve
B)  Offer curve
C)  Indifference curve
D)  Production possibility curveE) B) and D)
F) All of the above

Question 13

According to the absolute differences in cost theory of trade

Accepted Answer

A)  No country should specialize in the production of any commodity
B)  Every country should specialize in the production of commodities which it can produce more cheaply than other countries and exchange it for commodities which are cheaper in other countries
C)  Every country should specialize in production of goods which it can produce at higher cost than other countries and exchange it for commodities which are costlier than other countries
D)  All of the aboveE) C) and D)
F) None of the above

Question 14

Gains from trade depends on

Accepted Answer

A)  Relative strength of elasticity of demand for export and import good
B)  Size of the country
C)  Change in technology
D)  All of the aboveE) None of the above
F) A) and D)

Question 15

The principle of reciprocal demand was introduced by

Accepted Answer

A)  J.S.Mill
B)  Lionel Robbins
C)  Alfred Marshall
D)  Adam SmithE) All of the above
F) B) and C)

Question 16

In case of Mill's theory, where country A produces good X and country B produces good Y, if country A's demand for product Y increases, then country A's offer curve will

Accepted Answer

A)  Shift to the left
B)  Shift to the right
C)  Shift backwards
D)  Remain constantE) A) and D)
F) A) and C)

Question 17

If a country has favourable terms of trade, it will claim

Accepted Answer

A)  A larger share in the distribution of gains
B)  An equal share in the distribution of gains
C)  A smaller share in the distribution of gains
D)  None of the aboveE) B) and D)
F) B) and C)

Question 18

The two types of gains from trade are

Accepted Answer

A)  Internal and external gains
B)  Static and dynamic gains
C)  Relative and reactive gains
D)  All of the aboveE) A) and D)
F) A) and C)

Question 19

The classical theory of international trade is based on

Accepted Answer

A)  Labour theory of value
B)  Less than full employment
C)  Exchange rate differences
D)  None of the aboveE) C) and D)
F) A) and B)

Question 20

The term 'factor intensity' refers to

Accepted Answer

A)  The relative proportion of two commodities produced in a given period
B)  The relative amount of resources each country possesses
C)  The relative proportion of various factors of production used to produce a commodity
D)  None of the aboveE) None of the above
F) C) and D)

Exam 2: Understanding International Trade Theories and Terms

The main reason for different nations to enter into trade is that

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The fundamental reason why different countries involve in transactions with one another is the

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The opportunity cost theory considers

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The Comparative theory of international trade is based on

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The production possibility curve represents

Correct AnswerverifiedA

The difference in the domestic cost ratios of producing two commodities in two countries is known as

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The slope of the production possibility curve under Opportunity costs theory is also called

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Which factor does not influence terms of trade?

Correct AnswerverifiedD

The income terms of trade is

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The H-O theory assumed the prevalence of

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Relative factor abundance in H-O theory of trade can be defined in terms of

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Community indifference curves have the same characteristics as

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According to the absolute differences in cost theory of trade

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Gains from trade depends on

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The principle of reciprocal demand was introduced by

Correct AnswerverifiedShow Answer

In case of Mill's theory, where country A produces good X and country B produces good Y, if country A's demand for product Y increases, then country A's offer curve will

Correct AnswerverifiedShow Answer

If a country has favourable terms of trade, it will claim

Correct AnswerverifiedShow Answer

The two types of gains from trade are

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The classical theory of international trade is based on

Correct AnswerverifiedShow Answer

The term 'factor intensity' refers to

Correct AnswerverifiedShow Answer

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A

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D

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A

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