#1
According to the theory of comparative advantage, what determines a country's pattern of trade?
The country's level of technological advancement
The country's natural resources
The relative opportunity costs of producing goods
The country's population size
#2
Who introduced the concept of absolute advantage in international trade?
Adam Smith
David Ricardo
John Maynard Keynes
Paul Samuelson
#3
What is the opportunity cost of producing a unit of a good?
The monetary cost of producing the good
The total cost of producing the good
The value of the next best alternative foregone
The selling price of the good
#4
Which of the following is NOT a factor influencing comparative advantage?
Technological advancements
Cost of labor
Climate and geography
Government subsidies
#5
Which of the following is an assumption of the Ricardian model of international trade?
Constant returns to scale
Perfect competition
Identical production technologies
All of the above
#6
Which factor is NOT considered in the Heckscher-Ohlin model?
Technological differences
Factor endowments
Demand conditions
Factor mobility
#7
Which of the following best describes the law of comparative advantage?
A country should produce everything it needs domestically.
A country should produce only what it can produce most efficiently compared to other countries.
A country should focus on producing goods that it has an absolute advantage in producing.
A country should focus on importing goods that it has an absolute disadvantage in producing.
#8
What does the theory of comparative advantage suggest about the benefits of international trade?
It suggests that trade is a zero-sum game.
It suggests that trade is beneficial only for developed countries.
It suggests that all countries can benefit from trade by specializing in producing goods they have a comparative advantage in.
It suggests that trade is beneficial only for countries with abundant natural resources.
#9
What is the main assumption of the theory of comparative advantage?
Perfect competition exists in all markets.
Labor and capital are immobile between industries.
Countries engage in trade to maximize profits.
Countries have different opportunity costs in producing goods.
#10
Which trade theory suggests that countries should specialize in the production of goods that use their abundant factors of production?
Heckscher-Ohlin theory
Leontief Paradox
Mercantilism
New Trade Theory
#11
In international trade theory, what does the Linder hypothesis suggest?
Countries with similar preferences tend to trade more with each other.
Trade is based solely on differences in factor endowments.
Countries will always export goods that are intensive in their abundant factors of production.
Trade patterns are determined by differences in national income levels.
#12
Which of the following is a limitation of the Ricardian model?
It does not account for transportation costs.
It assumes constant opportunity costs.
It does not consider economies of scale.
All of the above
#13
Which economist is most closely associated with the development of the theory of comparative advantage?
Adam Smith
David Ricardo
John Stuart Mill
Karl Marx
#14
What does the concept of 'revealed comparative advantage' refer to?
A country's comparative advantage is revealed through its trade patterns.
Comparative advantage is predetermined and cannot change.
Comparative advantage can only be determined through government intervention.
Comparative advantage can be easily calculated using a simple formula.
#15
According to the product life cycle theory, in which stage of a product's life cycle is production typically shifted overseas?
Introduction stage
Growth stage
Maturity stage
Decline stage
#16
What does the Leontief Paradox refer to in international trade?
The theory that trade benefits both trading partners
The discovery that the US exported more labor-intensive goods than it imported
The finding that the US was relatively abundant in labor but exported capital-intensive goods
The observation that trade patterns were consistent with the predictions of the Heckscher-Ohlin model
#17
What does the gravity model of trade suggest?
Trade is inversely related to the distance between countries
Trade is directly related to the GDP of trading partners
Trade is directly related to the square of the distance between countries
Trade is inversely related to the size of trading partners' populations