Answer the following 5 Multiple Choice Questions 10 Marks A

Answer the following 5 Multiple Choice Questions (10 Marks)

A country does NOT engage in trade can benefit from trade only if

It employs a unique technology

Its wage rate is below the world average

It has an absolute advantage in at least one good

Pre-trade and free-trade relative prices are identical

Pre-trade and free-trade relative prices are not identical

The effect of trade on specialised employees of exporting industries will be ____ jobs and ____ pay because they are relatively____.

fewer, lower, mobile

more, higher, mobile

more, lower, immobile

fewer, lower, immobile

more, higher, immobile

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?

Imports are only restricted when foreign made goods do not meet domestic standard of quality

Import restrictions are the results of trade wars between hostile countries

Trade can have substantial effects on a country’s distribution of income

The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial

Restriction on Imports are intended to benefit domestic consumers.

In the specific factor model, a country’s production function is ____ because of ____.

a curved line, constant marginal returns

a curved line, a limited supply of labour

a curved line, diminishing marginal returns

a straight line, constant marginal returns

a straight line, diminishing marginal returns

The effect of trade on income distribution

is insignificant in the short run

is positive for all segments of an economy

can be significant in the short run

implies that there are no real gains from trade

refutes the model of comparative advantage

Solution

Ans 1 (5)A country does not engage in trade can benefit from trade only if pre-trade and free trade relative prices are not identical.

Ans 2( 5) The effect of trade on specialised employees of exporting industries will be more Jobs and higher pay because they are relatively immobile.

Ans 3(3) The Ricardian model of international trade demonstrate that trade can be mutually beneficial. Why ,then, do Government restricts imports of some goods?

Trade can be substantial effect on a country’s distribution of income.

Ans 4(5 ) In the specific factor model, a country’s production function is curved line because of diminishing marginal returns.

Ans 5(1) The effect of Trade on income distribution is insignificant in the short run.