International Trade solved MCQs

chapters
1 of 8
chapter:   Unit 1

1. Adam Smith favoured

a. Free trade among nations

B. Regulation of trade among nations

c. Closed economies

d. None of the above

2. Which of the following is the cause of international trade as per Heckscher-Ohlin tradetheory?

a. Difference in factor availability

B. Difference in cost of production

c. Difference in trade

d. Difference in currency system

3. The theory of comparative advantage in international trade was propounded by

a. Kindleberger

B. Adam Smith

c. David Ricardo

d. J.S. Mill

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

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

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

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

8. In Ricardian theory of international trade, the only factor of production is

a. Land

B. Labour

c. Capital

d. All of the above

9. The Absolute Advantage theory of international trade was propounded by

a. Adam Smith

B. David Ricardo

c. Alfred Marshall

d. Lionel Robbins

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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