Economics MCQs

Page No. 337

That the division of labor is limited by the size of the market best applies to which explanation of trade ?


aFactor endowment theory


bProduct life cycle theory


cEconomies of scale theory


d Overlapping demand theory



_____ 1954 study of U.S trade patterns showed that U.S exports were labor-intensive compared with U.S imports, even though the United States was widely regarded as a relatively capital-abundant nation ?


aPaul Samuelson’s


bWolfgang Stolpher’s


cStaffan Linder’s


dWassily Leontief’s


View Answer Wassily Leontief’s

For the United States empirical studies indicate that over the past two hundred years the cost of international transportation relative to the value of U.S imports has ?


aincreased


b Decreased


c Not changed


dAny of the above


View Answer Decreased

The trade model of the Swedish economies Heckscher and Ohlin maintains that ?


a Absolute advantage determines the distribution of the gains from trade


bComparative advantage determines the distribution of the gains from trade


cThe division of labor is limited by the size of the world market


dA country exports goods for which its resource endowments are most suited



Which trade theory contends that a country that initially develops and exports a new product may eventually become an importer of it and may no longer manufacture the product ?


a Theory of factor endowments


bTheory of overlapping demands


c Economies of scale theory


d Product life cycle theory



The factor endowment model of international trade was developed by ?


aAdam Smith


bDavid Ricardo


cJohn Stuart Mill


dEli Heckscher and Bertil Ohlin



Interindustry trade can be explained by all of the following except ?


ahigh transportation costs as a proportion of product value


bdifferent growing seasons of the year for agricultural products


c product differentiation for good such as automobiles


dhigh per capita incomes in exporting countries



A product will be traded only if the pre-trade price difference between the two countries ?


a is less than the cost of transporting it between them


b is greater than the cost of transporting it between them equals the cost of transporting it between them


cequals the cost of transporting it between them


dmore information in needed to answer this



Assume that Country A is relatively abundant in labor and Country B is relatively abundant in land Note that wages are the returns to labor and rents are the returns to land According to the factor price equalization theorem, once Country A begins specializing according to comparative advantage and trading with Country B: A. wages and rents should fall in Country A B. wages and rents should rise in Country A C. wages should rise and rents should fall in Country A D. wages should fall and rents should raise in Country A ?


a wages and rents should fall in Country A


b wages and rents should rise in Country A


cwages should rise and rents should fall in Country A


dwages should fall and rents should raise in Country A



The factor endowment theory was pioneered by ?


aAdam smith


b David Ricardo


cWassily Leontief


dEli Heckscher and Bertil Ohlin



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