| 1. |
Adam Smith favoured |
| A. | Free trade among nations |
| B. | Regulation of trade among nations |
| C. | Closed economies |
| D. | None of the above |
| Answer» A. Free trade among nations | |
| 2. |
Which of the following is the cause of international trade as per Heckscher-Ohlin trade theory? |
| A. | Difference in factor availability |
| B. | Difference in cost of production |
| C. | Difference in trade |
| D. | Difference in currency system |
| Answer» A. Difference in factor availability | |
| 3. |
The theory of comparative advantage in international trade was propounded by |
| A. | Kindleberger |
| B. | Adam Smith |
| C. | David Ricardo |
| D. | J.S. Mill |
| Answer» C. David Ricardo | |
| 4. |
According to Ohlin, the comparative cost differences arise because of |
| A. | Labour cost differences |
| B. | Factor endowment differences |
| C. | Exchange rate differences |
| D. | None of the above |
| Answer» B. Factor endowment differences | |
| 5. |
Adam Smith’s theory of international trade is based on |
| A. | Absolute differences in costs |
| B. | Homogeneity of labour |
| C. | Differences of exchange ratios |
| D. | Mobility of factors of production between countires |
| Answer» A. Absolute differences in costs | |
| 6. |
According to comparative advantage theory |
| A. | Capital is the only factor of production |
| B. | Labour is the only factor of production |
| C. | Both capital and labour are factors of production |
| D. | None of the above |
| Answer» B. Labour is the only factor of production | |
| 7. |
Heckscher-Ohlin theory of trade is based on |
| A. | Two-by-two-by-two model |
| B. | Three-by-three-by-three model |
| C. | Four-by-four-by-four model |
| D. | All of the above |
| Answer» A. Two-by-two-by-two model | |
| 8. |
In Ricardian theory of international trade, the only factor of production is |
| A. | Land |
| B. | Labour |
| C. | Capital |
| D. | All of the above |
| Answer» B. Labour | |
| 9. |
The Absolute Advantage theory of international trade was propounded by |
| A. | Adam Smith |
| B. | David Ricardo |
| C. | Alfred Marshall |
| D. | Lionel Robbins |
| Answer» A. Adam Smith | |
| 10. |
Haberler’s Opportunity cost theory explains the doctrine of comparative cost in terms of |
| A. | The saving’s curve |
| B. | The consumption curve |
| C. | The substitution curve |
| D. | The supply curve |
| Answer» C. The substitution curve | |
| 11. |
According to the Heckscher-Ohlin theory of trade, the most important cause of difference in relative commodity prices and trade between nations is a difference in |
| A. | Factor endowment |
| B. | Tastes |
| C. | Demand conditions |
| D. | All of the above |
| Answer» A. Factor endowment | |
| 12. |
Under constant opportunity cost, the production possibility curve is |
| A. | Convex to the origin |
| B. | Straight line |
| C. | Concave to the origin |
| D. | Upward sloping |
| Answer» B. Straight line | |
| 13. |
According to the theory of comparative advantage, countries gain from trade, because |
| A. | Trade makes firms more competitive, reducing their market power |
| B. | Every country has an absolute advantage in producing something |
| C. | World output can rise when each country specializes in what it does relatively best |
| D. | None of the above |
| Answer» C. World output can rise when each country specializes in what it does relatively best | |
| 14. |
Among the difference between inter-regional and international trade, the reason for international factor immobility includes |
| A. | Difference in languages |
| B. | Difference in occupational skills |
| C. | Restrictions imposed by foreign country on labour immigration |
| D. | All of the above |
| Answer» D. All of the above | |
| 15. |
According to Adam Smith, free trade is the result of |
| A. | Division of labour and specialisation both at the national and international level |
| B. | Specialisation only at the national level |
| C. | Division of labour and specialisation at the national level only |
| D. | Division of labour only at the international level |
| Answer» A. Division of labour and specialisation both at the national and international level | |
| 16. |
According to Ricardo, trade is possible between two countries when |
| A. | One country has absolute advantage in production of both commodities |
| B. | One country has an absolute advantage for production of both commodities but comparative advantage in the production of one commodity than the other country |
| C. | One country does not have any advantage in the production of both commodities |
| D. | A country does not have any line of production |
| Answer» B. One country has an absolute advantage for production of both commodities but comparative advantage in the production of one commodity than the other country | |
| 17. |
David Ricardo believed that the international trade is governed by |
| A. | Absolute cost advantage only |
| B. | Absolute cost and comparative cost advantage |
| C. | Comparative cost advantage |
| D. | Mobility of factors |
| Answer» C. Comparative cost advantage | |
| 18. |
The basics and gains from international trade under the theory of opportunity cost is determined by |
| A. | Homogeneity of labours |
| B. | The shape of the substitution curve or production possibility curve under different cost conditions |
| C. | Imperfect competition in factor and commodity markets |
| D. | Change in technology |
| Answer» B. The shape of the substitution curve or production possibility curve under different cost conditions | |
| 19. |
The production possibility curve under increasing opportunity costs is concave to the origin because |
| A. | The opportunity cost of leaving a unit of one commodity to have an additional unit of the other is constant |
| B. | Each country completely specializes in the production of only one commodity after trade |
| C. | They are the same at all points |
| D. | When a country in the production of one commodity in which it has comparative advantage, its opportunity costs increases |
| Answer» D. When a country in the production of one commodity in which it has comparative advantage, its opportunity costs increases | |
| 20. |
The importance of international trade includes |
| A. | Adverse terms of trade |
| B. | Lack of industrial diversification |
| C. | Balance of Payments deficit |
| D. | None of the above |
| Answer» D. None of the above | |
| 21. |
According to classical view, one of the main difference between inter-regional and international trade is |
| A. | Factor mobility |
| B. | Wage flexibility |
| C. | Both (a) and (b |
| D. | None of the above |
| Answer» A. Factor mobility | |
| 22. |
According to Adam Smith, diversification of labour at the international level requires the |
| A. | Existence of absolute differences in costs |
| B. | Existence of comparative differences in costs |
| C. | Existence of least cost combination of factors |
| D. | Existence of labour involved in production of a commodity |
| Answer» A. Existence of absolute differences in costs | |
| 23. |
The basic of international trade according to Ricardo is that |
| A. | A country will export those commodities in which its comparative production costs are high or will import those commodities in which its comparative production costs are less |
| B. | A country will import those commodities in which its comparative production cost are the same with other countries |
| C. | A country will export those commodities in which its comparative production costs are less or will import those commodities in which its comparative production costs are high |
| D. | A country will export those commodities in which its comparative production |
| Answer» C. A country will export those commodities in which its comparative production costs are less or will import those commodities in which its comparative production costs are high | |
| 24. |
According to physical criterion of the H-O theory of trade, a country is said to be relatively capital abundant if and only if |
| A. | A country is having capital relatively cheap and labour relative costly |
| B. | A country is endowed with a higher proportion of capital to labour than the other country |
| C. | A country is having labour relatively cheap and capital relatively costly |
| D. | A country is endowed with a higher proportion of labour to capital than the other country |
| Answer» B. A country is endowed with a higher proportion of capital to labour than the other country | |
| 25. |
The price criterion if the H-O theory of trade lays down that |
| A. | A country having labour relatively cheap and capital relatively costly is capitalabundant |
| B. | A country having capital relatively cheap and labour relatively costly is labourabundant |
| C. | A country having both capital and labour cheap is capital-abundant |
| D. | A country having capital relatively cheap and labour relatively costly is capital abundant |
| Answer» D. A country having capital relatively cheap and labour relatively costly is capital abundant | |