2. Which of the following is the cause of international trade as per Heckscher-Ohlin trade
theory?
Correct : A. Difference in factor availability
3. The theory of comparative advantage in international trade was propounded by
Correct : C. David Ricardo
4. According to Ohlin, the comparative cost differences arise because of
Correct : B. Factor endowment differences
5. Adam Smith’s theory of international trade is based on
Correct : A. Absolute differences in costs
6. According to comparative advantage theory
Correct : B. Labour is the only factor of production
7. Heckscher-Ohlin theory of trade is based on
Correct : A. Two-by-two-by-two model
8. In Ricardian theory of international trade, the only factor of production is
Correct : B. Labour
9. The Absolute Advantage theory of international trade was propounded by
Correct : A. Adam Smith
10. Haberler’s Opportunity cost theory explains the doctrine of comparative cost in terms of
Correct : 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
Correct : A. Factor endowment
12. Under constant opportunity cost, the production possibility curve is
Correct : B. Straight line
13. According to the theory of comparative advantage, countries gain from trade, because
Correct : 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
Correct : D. All of the above
15. According to Adam Smith, free trade is the result of
Correct : A. Division of labour and specialisation both at the national and international level
16. According to Ricardo, trade is possible between two countries when
Correct : 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
Correct : C. Comparative cost advantage
18. The basics and gains from international trade under the theory of opportunity cost is determined by
Correct : 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
Correct : 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
Correct : D. None of the above
21. According to classical view, one of the main difference between inter-regional and international trade is
Correct : A. Factor mobility
22. According to Adam Smith, diversification of labour at the international level requires the
Correct : A. Existence of absolute differences in costs
23. The basic of international trade according to Ricardo is that
Correct : 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
Correct : 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
Correct : 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
Correct : 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
Correct : 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
Correct : C. Trade between two nations or countries
29. The classical theory of international trade is based on
Correct : A. Labour theory of value
30. The necessity of absolute differences in costs of international trade is associated with
Correct : C. Absolute advantage theory
31. The opportunity cost theory considers
Correct : C. Both labour and capital
32. The Comparative theory of international trade is based on
Correct : A. Constant costs
33. The H-O theory of international trade was propounded by Ohlin in
Correct : B. 1933
34. Community indifference curves have the same characteristics as
Correct : C. Indifference curve
35. The factor price ratio(PC/PL)A < (PC/PL)B of countries A & B implies
Correct : D. Country A is abundant in capital
36. The H-O theory assumed the prevalence of
Correct : B. Perfect competition
37. The production possibility curve represents
Correct : A. The supply side
38. Relative factor abundance in H-O theory of trade can be defined in terms of
Correct : C. Production governed by increasing returns to scale
39. The slope of the production possibility curve under Opportunity costs theory is also called
Correct : B. Marginal rate of transformation
40. The term ‘factor intensity’ refers to
Correct : 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
Correct : B. Production of goods
42. If a country has favourable terms of trade, it will claim
Correct : A. A larger share in the distribution of gains
43. The income terms of trade is
Correct : 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?
Correct : D. Immigration
45. Gains from trade depends on
Correct : D. All of the above
46. The principle of reciprocal demand was introduced by
Correct : A. J.S.Mill
47. Terms of trade expresses the relationship between
Correct : 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
Correct : C. Potential gains
49. The two types of gains from trade are
Correct : 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
Correct : B. Shift to the right
51. The difference in price ratios of two commodities in the two trading countries is
Correct : C. Actual gains
52. The ratio between the quantities of a country’s imports to its exports is known as
Correct : C. Gross barter terms of trade
53. J.S.Mill introduced the theory of reciprocal demand to explain
Correct : B. Determination of equilibrium terms of trade
54. Mill’s theory of reciprocal demand indicates a
Correct : A. Country’s demand for one commodity in terms of the quantities of the other country it is prepared to give up in exchange
55. The gains from trade refers to
Correct : C. Net benefits or increases in goods that a country gets by trading with other countries
56. The ratio between the price of a country’s export goods to its import goods is called
Correct : D. Commodity or net barter terms of trade
57. An increase in the index of income terms of trade implies that
Correct : B. A country can import more goods in exchange for its exports
58. The terms of trade refers to the rate
Correct : A. At which the goods of one country is exchanged for the goods of another country
59. The types of terms of trade does not include
Correct : C. Productive capacity terms of trade
60. In the modern trade theory, the gains from international trade are clearly differentiated between
Correct : A. The gains from exchange and the gains from specialization
61. Under the gains from international trade, the gains from exchange is also known as the
Correct : B. Consumption gains
62. In modern trade theory, the gains from specialization is also known as the
Correct : C. Production gains
63. The terms of trade of a country improves when
Correct : D. The export price of a country relatively rises to its import prices
64. When a country’s import price relatively rises to its export prices,
Correct : B. The terms of trade of a country becomes worsened
65. The various methods of measuring gains from trade does not include
Correct : A. Haberler’s approach
66. According to Jacob Viner, the classical economists measured the gains from trade in terms of
Correct : D. All of the above
67. The classical theorists believed that the gains from trade resulted from
Correct : B. Increased production and specialization
68. The modern economists considered the gains from trade resulted from
Correct : C. Exchange and specialization
69. The concept of single factoral terms of trade was developed by
Correct : A. Jacob Viner
70. Mill’s theory of reciprocal demand is based on one of the assumptions that
Correct : C. The commodities are produced under the law of constant returns
71. When the export prices of a country relatively rises to its import prices, its terms of
trade are said to have
Correct : B. Improved
72. The concept of gross barter terms of trade was introduced by
Correct : D. F.W. Taussig
73. A single factoral terms of trade shows that a country’s factoral terms of trade improve
as productivity
Correct : B. Improves in its export industries
74. The concept of commodity or net barter terms of trade has been used by economists to measure
Correct : C. The gains from international trade
75. The term ‘terms of trade’ between two countries refers to
Correct : A. The barter terms of trade
76. The actual exchange ratio between two countries will depend upon the
Correct : C. Reciprocal demand
77. In world markets, the actual gain is always less than the potential gain since there is always
Correct : B. Imperfect completion
78. The theory of gains from trade was at the core of the
Correct : D. Classical theory of international trade
79. Prof. Ronald Findlay modified Ricardo’s measure of gains from trade using
Correct : C. The community indifference curve
80. The income terms of trade is called the
Correct : B. Capacity to import
81. The tariff that maximizes a country’s welfare is called the
Correct : C. Optimum tariff
82. Ad valorem tariffs are
Correct : B. Duties levied as fixed percentage of the value of the imported commodity
83. On the basis of origin and destination of goods, tariff may be classified into
Correct : B. Single-column tariff, double-column tariff and triple column tariff
84. Specific tariffs are assessed
Correct : C. On the basis of physical weight
85. A quota which established thorough mutual agreements or negotiation between countries is
Correct : D. Bilateral quota
86. Effects of tariffs included
Correct : A. Income effect
87. When a uniform rate of duty is imposed on all similar commodities irrespective of the
country from which they are imported, it is called
Correct : A. Single-column tariff
88. A quota system which allows a certain specified quantity of a commodity to be imported
duty free or at a low rate of import duty is
Correct : C. Tariff or custom quota
89. The tariff rates which are based on trade agreements or treaties with other countries is
known as
Correct : D. Conventional tariff
90. Which of the following is not included in the effects of quotas
Correct : C. Income effect
91. imposition of a tariff improves the terms of trade of the imposing country but reduces
its
Correct : B. Volume of trade
92. A tariff results in an improvement in terms of trade on one hand and on the other hand,
increases the
Correct : C. Level of welfare
93. The positive effect of a tariff is, when there is an increase in the welfare of a country due
to
Correct : A. An improvement in the terms of trade
94. There is an improvement in the welfare of country only when the
Correct : B. Positive effect is larger than its negative effect
95. A trade policy without tariffs and other quantitative restrictions blocking the movement
of goods between countries is
Correct : C. Free trade policy
96. Protection refers to a policy where
Correct : B. Domestic industries are to be protected from foreign competition
97. A tax or duty levied on goods when it enters or leave the national boundary of a country
is called
Correct : A. Tariff
98. When government levies import duties which varies with prices of commodities
imported , it is called
Correct : D. Sliding scale duty
99. Which of the following is not the effect of tariff?
Correct : D. none of the above
100. Prof. Kindleberger calls the combined protective and consumption effect as