Sources Of Comparative Advantage MCQs

Option A: abundant

Option B: scarce

Option C: neither

Option D: can’t tell without more information

Correct Answer: scarce ✔

Option A: The prices of trade goods to be lower than when there are no transportation costs

Option B: specialization to stop when the production costs of the trading partners equalize

Option C: The volume of trade to be less than when there are no transportation costs

Option D: The gains from trade to be greater than when there are no transportation costs

Correct Answer: The volume of trade to be less than when there are no transportation costs ✔

Option A: pursue free trade as a policy that leads to maximum global efficiency

Option B: grant subsidies to firms offering potential comparative advantage

Option C: provide loans to domestic workers in exporting industries

Option D: increase interest rates on loans made to firms in import-competing industries

Correct Answer: grant subsidies to firms offering potential comparative advantage ✔

Option A: everyone automatically gains from trade

Option B: The gainers from trade outnumber the losers from trade

Option C: The scarce factor necessarily gains from trade

Option D: None of the above

Correct Answer: The gainers from trade outnumber the losers from trade ✔

Option A: U.S exports are capital intensive relative to U.S imports

Option B: U.S imports are labor intensive relative to U.S exports

Option C: U.S exports are neither labor nor capital intensive

Option D: None of the above

Correct Answer: None of the above ✔

Option A: tastes and preferences

Option B: technology levels

Option C: factor indowments

Option D: Both A and B

Correct Answer: Both A and B ✔

Option A: countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other

Option B: countries with tend to specialize but not completely in their comparative advantage good

Option C: reciprocal demand leads to an equilibrium terms of trade by inducing change in both demand and supply

Option D: All of the above

Correct Answer: All of the above ✔

Option A: supply condition only

Option B: demand conditions only

Option C: supply and demand conditions

Option D: can’t tell without more information

Correct Answer: supply condition only ✔

Option A: research and development subsidies

Option B: loan guarantees

Option C: low interest rate loans

Option D: All of the above

Correct Answer: All of the above ✔

Option A: static, short run trade theory

Option B: dynamic long run trade theory

Option C: zero-sum theory of trade

Option D: negative-sum theory of trade

Correct Answer: dynamic long run trade theory ✔

Option A: factor endowments

Option B: factor intensities

Option C: technology

Option D: opportunity costs

Correct Answer: technology ✔

Option A: International trade affords producers monopoly power

Option B: National governments levy imports tariffs and quotas

Option C: Producing goods entails increasing costs

Option D: Economies of scale exist for producers

Correct Answer: Economies of scale exist for producers ✔

Option A: helps explain why some nations use industrial policy to support potentially competitive new firms

Option B: cannot explain strategic competition between firms such as Boeing and Airbus

Option C: Is another name for Ricardo’s comparative advantage theory?

Option D: None of the above

Correct Answer: helps explain why some nations use industrial policy to support potentially competitive new firms ✔

Option A: Factor endowment theory

Option B: Product life cycle theory

Option C: Economies of scale theory

Option D: Overlapping demand theory

Correct Answer: Economies of scale theory ✔

Option A: Paul Samuelson’s

Option B: Wolfgang Stolpher’s

Option C: Staffan Linder’s

Option D: Wassily Leontief’s

Correct Answer: D. Wassily Leontief’s ✔

Option A: increased

Option B: Decreased

Option C: Not changed

Option D: Any of the above

Correct Answer: Decreased ✔

Option A: Absolute advantage determines the distribution of the gains from trade

Option B: Comparative advantage determines the distribution of the gains from trade

Option C: The division of labor is limited by the size of the world market

Option D: A country exports goods for which its resource endowments are most suited

Correct Answer: A country exports goods for which its resource endowments are most suited ✔

Option A: Theory of factor endowments

Option B: Theory of overlapping demands

Option C: Economies of scale theory

Option D: Product life cycle theory

Correct Answer: Product life cycle theory ✔

Option A: Adam Smith

Option B: David Ricardo

Option C: John Stuart Mill

Option D: Eli Heckscher and Bertil Ohlin

Correct Answer: Eli Heckscher and Bertil Ohlin ✔

Option A: high transportation costs as a proportion of product value

Option B: different growing seasons of the year for agricultural products

Option C: product differentiation for good such as automobiles

Option D: high per capita incomes in exporting countries

Correct Answer: high per capita incomes in exporting countries ✔

Option A: is less than the cost of transporting it between them

Option B: is greater than the cost of transporting it between them equals the cost of transporting it between them

Option C: equals the cost of transporting it between them

Option D: more information in needed to answer this

Correct Answer: is greater than the cost of transporting it between them equals the cost of transporting it between them ✔

Option A: wages and rents should fall in Country A

Option B: wages and rents should rise in Country A

Option C: wages should rise and rents should fall in Country A

Option D: wages should fall and rents should raise in Country A

Correct Answer: wages should rise and rents should fall in Country A ✔

Option A: Adam smith

Option B: David Ricardo

Option C: Wassily Leontief

Option D: Eli Heckscher and Bertil Ohlin

Correct Answer: Eli Heckscher and Bertil Ohlin ✔

Option A: evidence against the Ricardi an model

Option B: evidence against the Heckscher-Ohl in model

Option C: support for the Ricardian model

Option D: support for the Heckcher Ohlin model

Correct Answer: evidence against the Heckscher-Ohl in model ✔

Option A: technologically efficient relative to the rest of the world

Option B: capital abundant relative to the rest of the world

Option C: labor abundant relative to the rest of the world

Option D: All of the above

Correct Answer: capital abundant relative to the rest of the world ✔

Option A: calculate the capital and labor required to produce $1 million of U.S exports and imports

Option B: calculate the labor productivity of America workers relative to foreign workers

Option C: calculate the capital productivity of American capital relative to foreign capital

Option D: All of the above

Correct Answer: calculate the capital and labor required to produce $1 million of U.S exports and imports ✔

Option A: Ricardian theory of comparative advantage

Option B: Heckscher Ohl in theory of comparative advantage

Option C: Linder theory of overlapping demand

Option D: All of the above

Correct Answer: Heckscher Ohl in theory of comparative advantage ✔

Option A: tastes

Option B: technology

Option C: factor/resource

Option D: opportunity cost

Correct Answer: factor/resource ✔

Option A: stop the process of product price equalization and factor price equalization before they are complete:

Option B: ensure that the process of product price equalization and factor price equalization are complete

Option C: eliminate all of the feasible gains from international trade

Option D: maximize all of the feasible gains from international trade

Correct Answer: stop the process of product price equalization and factor price equalization before they are complete: ✔

Option A: Stolpher-Samuelson theory

Option B: factor endowment theory

Option C: specific factors theory

Option D: overlapping demand theory

Correct Answer: specific factors theory ✔

Option A: intraindustry specialization and trade

Option B: interindustry specialization and trade

Option C: demand conditions underlying specialization and trade

Option D: income conditions underlying specialization and trade

Correct Answer: interindustry specialization and trade ✔

Option A: technology

Option B: advertising

Option C: factor endowments

Option D: both (a) and (c)

Correct Answer: factor endowments ✔

Option A: have no impact on patterns of international trade

Option B: have tended to make U.S steel companies more competitive internationally

Option C: can affect production costs and thus alter comparative advantages and trade patterns

Option D: have been eliminated by the nations participating in NAFTA

Correct Answer: can affect production costs and thus alter comparative advantages and trade patterns ✔

Option A: Explains why the United States might export autos and import clothing

Option B: Explains why the United States might export and import differentiated versions of the same product such as different types of autos

Option C: Assumes that transport costs are very low or do not exist

Option D: ignores seasonal considerations for agricultural goods

Correct Answer: Explains why the United States might export and import differentiated versions of the same product such as different types of autos ✔

Option A: increase in the volume of trade

Option B: Smaller gain from trade

Option C: Decline in the income of home producers

Option D: Decrease in the level of specialization in production

Correct Answer: increase in the volume of trade ✔

Option A: similar endowments of natural resources

Option B: similar levels of technology

Option C: similar per-capita incomes

Option D: similar wage levels

Correct Answer: similar per-capita incomes ✔

Option A: Devote excessive amounts of resources to agricultural production

Option B: Devote insufficient amounts of resources to agricultural production

Option C: Export products that are land-intensive

Option D: Import products that are land-intensive

Correct Answer: Export products that are land-intensive ✔

Option A: Tastes and preferences

Option B: Expectations of future interest rate levels

Option C: Per-capita income levels

Option D: Labor productivities

Correct Answer: Per-capita income levels ✔

Option A: How economies of scale make possible a larger variety of products in international trade

Option B: A transfer of wealth from domestic consumer to domestic producer as the result of trade

Option C: How a natural monopoly is forced to behave more competitively with international trade

Option D: How a natural monopoly is forced to behave less competitively with international trade

Correct Answer: How economies of scale make possible a larger variety of products in international trade ✔

Option A: Economies of large-scale production

Option B: Relative abundance of various resources

Option C: Relative costs of labor

Option D: Research and development expenditures

Correct Answer: Relative abundance of various resources ✔