T.Y B.COM
SEMESTER - 5
INTERNATIONAL TRADE
(IT)
MCQS - OCTOBER 2017
1. Who advocated free trade as the best policy for the nations of the world?
A) David Ricardo
B) Heckscher-Ohlin
C) Adam smith
D) Paul Krigman
2. What is meant by Autarky in International Trade?
A) Monopoly in International Trade.
B) Imposition of restrictions in International Trade.
C) Removal of all restrictions from International Trade.
D) The idea of Self-Sufficiency and no International trade by a country.
3. The offer curves introduced by Alfred Marshall, helps us to understand how the is estimated in International Trade.
A) Terms of Trade
B) Equilibrium Price Ratio
C) Exchange Rate
D) Satisfaction Level
4. Identical demand conditions in home and foreign country but inelastic supply in home country and elastic supply in foreign country will result into the following:
A) Lower price in foreign country
B) Higher price in foreign country
C) Lower price in home country
D) Equal price in both the countries
5. Match the following:
(i) absolute cost advantatre | A. David Ricardo |
(ii) comparative cost advantage | B. J.S. Mill |
(iii) Principle of reciprocal demand | C. Adam Smith |
(iv) Offer curves | D. Edgeworth-Marshall |
A) i - A, ii - B, iii - C, iv - D
B) i - C, ii - A, iii - B, iv - D
C) i - C, ii - A, iii - D, iv - B
D) i - A, ii - C, iii - B, iv - D
6. If the domestic terms of trade between products X and Y is 2:1 for country A and 1:2 for country B, it implies that:
A) X is relatively cheaper in country A
B) Y is relatively cheaper in country A
C) X is relatively cheaper in country B
D) Y is relatively costlier in country B
7. The table below shows consumption shares of the two countries A and B for commodities X and Y, after international trade. Country A completely specializes in the production of X and country B in Y. What international terms of trade have been applied in this hypothetical table?
COUNTRY | COMMODITY | TOTAL CONSUMPTION | |
X | Y | ||
A | 60 | 40 | 100 |
B | 40 | 60 | 100 |
WORLD OUTPUT | 100 | 100 | 200 |
A) 1:2
B) 2:1
C) 1:1
D) 3:2
8. __________ of the two countries resolve the problem of determining the exact terms of trade that emerge in trade equilibrium
A) Supply curves
B) Offer curves
C) Cost Ratios
D) Domestic terms of trade
9. Which one of the following is the cause of international trade as per Heckscher-ohlin trade theory?
A) Difference in factor availability
B) Difference in technology
C) Difference in costs
D) None of the above
10. Krugman’s new trade theory explain:
A) Positive Network effects
B) Static condition of trade
C) Comparative costs advantage from trade
D) Natural differences in resources and climate
11. Identify the correct assumption of Ricardian Theory of comparative advantage.
A) Labor is the only factor of production
B) Capital is the only factor of production
C) There are similar tastes in both countries
D) A & C are correct
12. If the quantity of import index had risen by 130 and that of quantity exports by 180, then the gross barter terms of trade would be
A) 133.33
B) 72.22
C) 88.15
D) 34.11
13. Developing countries stand to gain from international trade because
A) Trade enables them to specialize in producing where they have a comparative advantage.
B) Trade gives them access to the greater variety of goods produced abroad.
C) Trade allows them to produce larger amounts than they could consume themselves, taking advantage of increasing returns to scale.
D) All of the above.
14. According to Heckscher-Ohlin model when a country opens up to international trade than the demand for the country’s abundant factor will
A) Increase
B) Decrease
C) Remains constant
D) None of the above
15. The difference between single and double factorial terms of trade is explained by productivity change in ________ productivity.
A) Export
B) Comparative
C) Absolute
D) Import
16. What is the international opportunity cost ratio for the production possibilities of Malaysia?
Commodities | ||
Countries | Textiles (units) | Rubber(units) |
India | 120 | 120 |
Malaysia | 40 | 80 |
A) 1:1
B) 1:2
C) 1:3
D) 1:4
17. The offer curve of country determines
A) Absolute commodity price
B) determines no Price
C) Relative commodity price
D) None of the above
18. International Trade results in _________ of product prices
A) Reduction
B) Disturbances
C) Equalization
D) Shift
19. The offer curve is expected to be non-linear as it is supposed to rest on ___________.
A) Therory of comparative cost advantage
B) Law of demand
C) Law of diminishing marginal utility
D) Diminishing returns to scale
20. France specializing in Perfumes is shown on the X axis and Germany specializing in Automobiles is shown on the Y axis. While the TOT line is exactly between the DER Lines of the two Trading partners, due to the a high liking for the unique fragrance of French perfumes, Germanys Offer curve becomes very inelastic. The TOT line is expected to
A) Move towards Origin
B) Move towards Y axis
C) Move towards X axis
D) Remain unchanged
21. Which of these is not a feature of the new theory of international trade?
A) Intra-industry trade
B) Internal economies of scale
C) External economies of scale
D) Constant returns to scale
22. Classical economists visualize only __________ of interest among trading nations.
A) Conflict
B) Harmony
C) Absence
D) Presence
23. Given that output per day work:
Country | Commodity X | Commodity Y |
A | 100 | 100 |
B | 30 | 60 |
Two countries specialize their production as per Ricardian theory and exchange the same at the rate of 1X: 1.6Y. If country B consumes 36 units fits products and remaining export to country A. How many units of its products do country A export to country B?
A) 24
B) 32
C) 15
D) 48
24. Between two countries capital intensive product is that one in which with same amount of capital we combine ___________.
A) More labour
B) no labour
C) Less labour
D) Cheap labour
25. Given the import quantity and price indices as well the export quantity and prices indices, we can find out __________.
A) Gross barter terms of trade
B) Net barter terms of trade
C) Income terms of trade
D) All the above
26. Export price index is less than one, an increase in export prices would lead to _______.
A) Decrease in terms of trade
B) Increase in terms of trade
C) No change in terms of trade
D) Unitary terms of trade
27. To ensure that factor intensity reversal does not take place, the production isoqaunts of the two countries for the two goods - the capital - intensive and the labour - intensive good - must
A) Intersect only once
B) Intersect twice
C) Intersect thrice
D) Be parallel to each other
28. Which of the following is a basis for international trade?
A) Difference in factor endowments of the countries
B) Difference in demand and supply conditions in the countries
C) Difference in product prices in the countries
D) All of the above
29. The basic assumption under comparative advantage theory is
A) Homogeneity of labor.
B) Transportation cost is very high between the two countries
C) Both nations follow a policy of trade barriers.
D) Labor is freely mobile between countries
30. Improvement in value of Gross barter TOT is expressed as
A) Increase in import quantity index
B) Decrease in export quantity index
C) Decrease in import quantity index
D) None of the above
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