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
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 […]
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 […]
QUESTION Which of the following statements best indicates Samuelson’s criticism of free trade? A. Dynamic gains lead to a universally beneficial outcome for all countries. B. Offshoring service jobs that were traditionally mobile will increase the market clearing wage rate. C. Free trade has historically been beneficial only to developing countries. D. By importing cheap […]
QUESTION One of the rebuttals to Samuelson’s critique of the free trade model is that: A. the United States’ ability to achieve constant returns to specialization is unparalleled. B. the strict immigration policies of the United States help insulate the economy from inward migration. C. introducing trade barriers may in fact be beneficial to developed […]
QUESTION Which of the following is a reason for diminishing rather than constant returns to specialization? A. All resources are of the same quality. B. Resources can shift from the production of one good to another seamlessly. C. Each country has a fixed stock of resources. D. Different goods use different resources in different proportions. […]
QUESTION Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively. While Meitneria doesn’t produce textiles, Seaboria is not as technologically advanced as Meitneria. In this situation, according to the Heckscher-Ohlin theory: A. Meitneria will import textiles from Seaboria and export heavy machinery to it. B. Meitneria will invest more than Seaboria […]
QUESTION According to the Heckscher-Ohlin theory, the pattern of international trade is determined by differences in: A. labor productivity. B. diminishing returns. C. factor endowments. D. management practices. E. trade barriers. ANSWER C
QUESTION Michael Porter argues that advanced factors are the most significant for competitive advantage. Indicate whether the statement is true or false. ANSWER TRUE Michael Porter argues that advanced factors are the most significant for competitive advantage. The benefits of investments in advanced factors of production by related and supporting industries can spill over […]
QUESTION Neo-mercantilists equate political power with economic power and economic power with: A. corruption. B. a balance-of-trade surplus. C. regional dominance. D. a trade monopoly. E. capitalism. ANSWER B