QUESTION Which of the following suggests that consumers in all nations can consume more if there are no restrictions on trade? A. The Heckscher-Ohlin theory B. Mercantilism C. Leontief’s paradox D. Ricardo’s theory of comparative advantage E. The Samuelson critique ANSWER D
Date: September 3rd, 2020
QUESTION The difference between Ricardo’s theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory: A. makes more simplifying assumptions. B. cannot be subjected to empirical tests. C. actually predicts trade patterns with greater accuracy. D. argues that the pattern of international trade is determined by differences in national factor endowments. E. suggests that trade […]
Date: September 3rd, 2020
QUESTION Palladia specializes in the production of beef and produces beef more efficiently than any other country. It buys wheat, which it produces less efficiently than beef, from Rhodia, even though it produces wheat more efficiently than Rhodia. Which of the following theories of international trade supports Palladia’s decision to buy wheat from Rhodia? A. […]
Date: September 3rd, 2020
QUESTION Vernon argues that pioneering firms in the United States kept production facilities closer to the market and centers of decision making because: A. of the uncertainty and risks inherent in introducing new products. B. they believed that foreign production facilities were inferior in technical skills. C. they believed that U.S. labor costs were much […]
Date: September 3rd, 2020
QUESTION Argonia and Selenia have specialized in the production of industrial equipment and pharmaceuticals respectively. Argonia exports industrial equipment to Selenia, which in turn exports chemicals and medicines to Argonia. According to the theory of comparative advantage, this mutually beneficial trade relationship best illustrates: A. the significance of trade barriers. B. a positive-sum game. C. […]
Date: September 3rd, 2020
QUESTION Which of the following suggests that trade is a positive-sum game in which all participating countries fetch economic gains? A. The Heckscher-Ohlin theory B. Mercantilism C. The theory of comparative advantage D. Leontief’s paradox E. The Samuelson critique ANSWER C
Date: September 3rd, 2020
QUESTION Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable land. This follows the theory of comparative advantage, and we can […]
Date: September 3rd, 2020
QUESTION Diminishing returns to specialization occur when: A. resources can move freely from the production of one good to another within a country. B. more units of resources are required to produce each additional unit. C. the cost of producing goods reduces substantially with increase in number of goods produced. D. the quality of resources […]
Date: September 3rd, 2020
QUESTION Which of the following factors is taken into consideration by David Ricardo’s theory of comparative advantage in order to explain the pattern of international trade? A. Absolute advantage of a country with reference to natural resources B. The proportions in which the factors of production are available C. International differences in labor productivity D. […]
Date: September 3rd, 2020
QUESTION Which of the following is consistent with the central beliefs of mercantilism? A. A country’s government should intervene to achieve a surplus in the balance of trade. B. A large volume of trade is essential regardless of whether it comes from imports or exports. C. Trade is a positive-sum game in which all countries […]
Date: September 3rd, 2020
