McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Economics (CBCS) .
Chapters
| 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 | |
| 26. |
The main reason for different nations to enter into trade is that |
| 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 above |
| Answer» C. No country has the capacity to produce all the goods and services required by its citizens/people | |
| 27. |
According to the absolute differences in cost theory of trade |
| 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 above |
| Answer» 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 | |
| 28. |
International trade refers to |
| A. | Domestic trade |
| B. | Inter-regional trade |
| C. | Trade between two nations or countries |
| D. | Internal trade |
| Answer» C. Trade between two nations or countries | |
| 29. |
The classical theory of international trade is based on |
| A. | Labour theory of value |
| B. | Less than full employment |
| C. | Exchange rate differences |
| D. | None of the above |
| Answer» A. Labour theory of value | |
| 30. |
The necessity of absolute differences in costs of international trade is associated with |
| A. | Comparative advantage theory |
| B. | Opportunity Cost theory |
| C. | Absolute advantage theory |
| D. | Theory of Reciprocal Demand |
| Answer» C. Absolute advantage theory | |
| 31. |
The opportunity cost theory considers |
| 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 capital |
| Answer» C. Both labour and capital | |
| 32. |
The Comparative theory of international trade is based on |
| A. | Constant costs |
| B. | Variable costs |
| C. | Increasing costs |
| D. | Decreasing costs |
| Answer» A. Constant costs | |
| 33. |
The H-O theory of international trade was propounded by Ohlin in |
| A. | 1932 |
| B. | 1933 |
| C. | 1934 |
| D. | 1935 |
| Answer» B. 1933 | |
| 34. |
Community indifference curves have the same characteristics as |
| A. | Transformation curve |
| B. | Offer curve |
| C. | Indifference curve |
| D. | Production possibility curve |
| Answer» C. Indifference curve | |
| 35. |
The factor price ratio(PC/PL)A < (PC/PL)B of countries A & B implies |
| A. | Country A is abundant in labour |
| B. | Country B is abundant in capital |
| C. | Country B is abundant in labour |
| D. | Country A is abundant in capital |
| Answer» D. Country A is abundant in capital | |
| 36. |
The H-O theory assumed the prevalence of |
| A. | Monopolistic forms of market |
| B. | Perfect competition |
| C. | Oligopolistic forms of market |
| D. | Monopoly |
| Answer» B. Perfect competition | |
| 37. |
The production possibility curve represents |
| A. | The supply side |
| B. | The demand side |
| C. | Combination of four commodities |
| D. | None of the above |
| Answer» A. The supply side | |
| 38. |
Relative factor abundance in H-O theory of trade can be defined in terms of |
| 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 intensities |
| Answer» C. Production governed by increasing returns to scale | |
| 39. |
The slope of the production possibility curve under Opportunity costs theory is also called |
| A. | The average production curve |
| B. | Marginal rate of transformation |
| C. | Indifference curve |
| D. | Isoquant curve |
| Answer» B. Marginal rate of transformation | |
| 40. |
The term ‘factor intensity’ refers to |
| 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 above |
| Answer» C. The relative proportion of various factors of production used to produce a commodity | |
| 41. |
The fundamental reason why different countries involve in transactions with one another is the |
| A. | Theory of absolute differences in costs |
| B. | Production of goods |
| C. | Gains from trade |
| D. | Supply of goods |
| Answer» B. Production of goods | |
| 42. |
If a country has favourable terms of trade, it will claim |
| 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 above |
| Answer» A. A larger share in the distribution of gains | |
| 43. |
The income terms of trade is |
| 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 above |
| Answer» A. The net barter terms of trade of a country multiplied by its export volume index | |
| 44. |
Which factor does not influence terms of trade? |
| A. | Devaluation |
| B. | Overpopulation |
| C. | Trade policy |
| D. | Immigration |
| Answer» D. Immigration | |
| 45. |
Gains from trade depends on |
| 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 above |
| Answer» D. All of the above | |
| 46. |
The principle of reciprocal demand was introduced by |
| A. | J.S.Mill |
| B. | Lionel Robbins |
| C. | Alfred Marshall |
| D. | Adam Smith |
| Answer» A. J.S.Mill | |
| 47. |
Terms of trade expresses the relationship between |
| A. | Balance of payments between two countries |
| B. | The export price and import price of a country |
| C. | Gains and loss of a country in international trade |
| D. | None of the above |
| Answer» B. The export price and import price of a country | |
| 48. |
The difference in the domestic cost ratios of producing two commodities in two countries is known as |
| A. | Actual gains |
| B. | Partial gains |
| C. | Potential gains |
| D. | Price gains |
| Answer» C. Potential gains | |
| 49. |
The two types of gains from trade are |
| A. | Internal and external gains |
| B. | Static and dynamic gains |
| C. | Relative and reactive gains |
| D. | All of the above |
| Answer» B. Static and dynamic gains | |
| 50. |
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 |
| A. | Shift to the left |
| B. | Shift to the right |
| C. | Shift backwards |
| D. | Remain constant |
| Answer» B. Shift to the right | |
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