International Trade 4

1. International trade activities do NOT include:

• A. the exchange of visible and invisible goods 

• B. international movement of labor and money

• C. international processing

• D. re - export

2. The source of benefits from free trade in Heckscher - Ohlin model is:

• A. Comparative advantage based on different factor endowments

• B. Comparative advantage based on different labour productivity

• C. Economies of scale in production 

• D. Comparative advantage based in increasing returns to scale technology

3. According to the factor endowment model of Heckcher and Ohlin, countries heavily endowed with land will :

• A. devote excessive amounts of resources to agricultural production

• B. devote insufficient amount of resources to agricultural production

• C. export products that are land-intensive.

• D. import products that are land-intensive

4. Internal economies of scale occurs when ............ and therefore leads to .............

• a. cost per unit of output depends on the size of the industry; perfectly competitive market

• b. cost per unit of output depends on the size of a firm; perfectly competitive market

• c. cost per unit of output depends on the size of a firm; imperfectly competitive market

• d. cost per unit of output depends on the size of the industry; imperfectly competitive

5. Intra-industry trade will tend to dominate trade flows. Which following conditions exist?

• a. Different relative amount of country factor availabilities

• b. Similar relative amount of country factor availabilities

• c. Homogeneous products that cannot be differentiated

• d. Constant cost industries

6. Which following is NOT true about the gravity model?

• a. When other things equal, the larger and closer the two countries are, the larger volume of trade is expected to be

• b. The volume of trade between two countries increases with the economic size of the two countries, and diminishes with the distance between them

• c. Distance is considered as a barrier of trade because it increases transportation cost

• d. Trade volume between two countries can be predicted perfectly by the gravity model

8. Internal economies of scale

• a. is a function of the productivity of factors

• b. is a comparative advantage in sophisticated technological goods

• c. means the higher the quantity produced the lower the per unit costs

• d. is a function of concentration in the sector

9. An import tariff of $10 per unit of imported good imposed by a large country

• a. increases the price of this good in the importing country by $10 and leaves export prices unaffected

• b. increases the price of this good in the importing country by more than $10 and raises export prices.

• c. increases the volume of exports of that good by foreigners.

• d. increases the price of this good in the importing country by less than $10 and lowers export prices.

10. Which industrialization policy used by developing countries places emphasis on the comparative advantage principle as a guide to resource allocation?

• a. export oriented industrialization.

• b. import substitution industrialization

• c. international commodity agreements.

• d. Infant Industry promotion

12. Which of the following is NOT a council of a WTO

• a. Council for trade in goods

• b. Council for trade in services

• c. Council for trade-related investment

• d. Council for trade-related aspects of intellectual poverty right