WorksheetsFIB Quiz 1
Total questions: 15
Worksheet time: 15mins
Which economic theory advocates that a nation’s wealth is measured by its stock of precious metals, especially gold and silver?
Mercantilism
Absolute Advantage
Comparative Advantage
Heckscher - Ohlin
According to Mercantilism, a country should aim to:
Maximize imports and minimize exports
Maximize exports and minimize imports
Produce goods with low opportunity cost
Specialize in capital-intensive goods
Who is credited with developing the theory of Absolute Advantage?
David Ricardo
Haberler
John Stuart Mill
Adam Smith
In Absolute Advantage theory, specialization occurs when:
A country produces goods with lowest opportunity cost
Both countries have the same production efficiency
A country produces more output with the same resources than another country
Countries produce goods with the highest labour cost
According to Ricardo’s theory of comparative advantage, the basis of trade is:
Relative cost differences measured in terms of labor cost
Opportunity cost expressed in terms of forgone alternative production
Absolute cost differences
Differences in factor prices
Haberler’s Opportunity Cost theory differs from Ricardo’s in that:
It ignores resource limitations
It uses labor theory of value
It uses opportunity cost measured in forgone production of other goods
It focuses only on absolute cost differences
Which statement is true about comparative advantage?
It implies no trade if one country has advantage in all goods
It requires identical production costs in both countries
It depends entirely on absolute efficiency
It suggests trade can occur even if one country is more efficient in both goods
If Country A can produce 10 units of cloth with the same resources that Country B uses to produce 6 units of cloth, Country A:
Has a comparative advantage in cloth
Has an absolute advantage in cloth
Has no trade advantage
Faces an opportunity cost disadvantage
The Heckscher-Ohlin theory explains trade based on:
Differences in technology
Differences in factor costs
Differences in factor endowments
difference in factor productivity
The Leontief Paradox found that the US:
Exported capital-intensive goods as predicted by H-O
Imported more services than goods
Did not engage in international trade
Exported labor-intensive goods despite being capital-abundant
Which theory can explain trade between two countries with identical technology but different resources?
H-O Theory
Absolute Advantage
Mercantilism
Comparative Advantage
Which assumption is relaxed by Haberler compared to Ricardo?
Only labor as a factor of production
Constant returns to scale
Perfect competition
Labor mobility within a country
Heckscher-Ohlin theory assumes:
Technology is different across countries
Factors are perfectly mobile internationally
Factors are immobile internationally but mobile domestically
Only labor is used in production
Absolute theory can fail to explain trade if:
Countries have different opportunity costs
One country has an absolute advantage in both goods
Resources are immobile
Markets are perfectly competitive
According to the Heckscher–Ohlin Theory, a country will export goods that:
uses its scarce resources intensively
uses its abundant resources intensively
Can be produced with the least amount of labour
can be produced at lower opportunity cost
