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International Trade MCQS Test Questions with Answers Well Arranged

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International Trade MCQS Test
Questions with Answers Well
Arranged

The Heckscher-Ohlin model of international trade uses _____ and ______ to explain
trade patterns.
A. factor abundance; factor intensity
B. comparative advantage; absolute advantage
C. tariffs; quotas
D. factor availability; factor usability - Answer-A. factor abundance; factor intensity

The Heckscher-Ohlin model assumes that factors of production can move freely
_______, but cannot move _______.
A. internationally; domestically
B. after they are fully trained; before the training period is over
C. within unskilled occupations; into high-skill jobs
D. domestically; internationally - Answer-D. domestically; internationally

Suppose that the United States and China each produce steel and cloth. In the
Heckscher-Ohlin model, if the United States enjoys a comparative advantage in steel
production, then:
A. the United States must have an absolute advantage in steel production.
B. the United States will also have a comparative advantage in cloth production.
C. China must have a comparative advantage in cloth production.
D. China must have an absolute advantage in cloth production. - Answer-C. China must
have a comparative advantage in cloth production.

The implication of resources being mobile domestically is that:
A. labor is paid the same wage and capital receives the same rental price in all
domestic industries
B. there is often unemployment
C. they lose the chance to become guest workers in other nations.
D. capital and land are often not suited for use in other industries - Answer-A. labor is
paid the same wage and capital receives the same rental price in all domestic industries

The Heckscher-Ohlin model assumes that a nation's two industries use labor and
capital:
A. at different intensities depending on changing technology.
B. at the same intensity in each industry; that is, the capital-labor ratio is the same in
each industry.
C. at different intensities, with one being more capital-intensive than the other.

, D. in no definite pattern. - Answer-C. at different intensities, with one being more capital-
intensive than the other.

Why is the PPF bowed out in the Heckscher-Ohlin model?
A. There are increasing opportunity costs of producing more of each good.
B. Labor is specific to the production of the other good.
C. Labor is not perfectly mobile between the production of the two goods.
D. Capital is specific to the production of one good. - Answer-A. There are increasing
opportunity costs of producing more of each good.

There are many real-life examples of factor-intensity (the ratio of capital to labor)
differences in the same industries in different nations. How does the Heckscher-Ohlin
model handle this?
A. Factor-intensity differences do not change the predictive value of the model.
B. The Heckscher-Ohlin model ignores the possibility of different factor intensities and
instead assumes that each industry has the same factor intensity in every nation.
C. The Heckscher-Ohlin model makes no assumptions about different factor intensities.
D. The Heckscher-Ohlin model assumes that all firms require equal amounts of capital
and labor just to be on the safe side. - Answer-B. The Heckscher-Ohlin model ignores
the possibility of different factor intensities and instead assumes that each industry has
the same factor intensity in every nation.

According to the short-run (specific-factors) model, how will FDI affect the marginal
productivity of labor in the recipient nation?
A. The MPL will rise only in the production of the labor-intensive good.
B. The MPL will fall in the production of both the labor- and capital-intensive goods.
C. The MPL will rise only in the production of the capital-intensive good.
D. The MPL will rise in the production of both the labor- and capital-intensive goods. -
Answer-D. The MPL will rise in the production of both the labor- and capital-intensive
goods.

The Heckscher-Ohlin Model assumes that:
A. the technologies used to produce the two goods are different in the two countries.
B. consumer tastes are different across countries.
C. consumer tastes and technologies are the same in the two countries.
D. factor endowments are the same in the two countries. - Answer-C. consumer tastes
and technologies are the same in the two countries.

LCD TVs are capital intensive, and tennis racquets are labor intensive. Suppose
Canada has $100 billion of capital and 2 million workers and Mexico has $10 billion of
capital and 20 million workers. According to the Heckscher-Ohlin model:
A. Canada will specialize in and export tennis racquets.
B. Mexico will import tennis racquets.
C. Mexico will specialize in and export LCD TVs.
D. Canada will specialize in and export LCD TVs. - Answer-D. Canada will specialize in
and export LCD TVs.

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