Answer the following 5 Multiple Choice Questions (10 Marks)
country does NOT engage in trade can benefit from trade only if
A) It employs a unique technology
B) Its wage rate is below the world average
C) It has an absolute advantage in at least one good
D) Pre-trade and free-trade relative prices are identical
E) Pre-trade and free-trade relative prices are not identical
2. The effect of trade on specialised employees of exporting industries will be ____ jobs and ____ pay because they are relatively____.
A) fewer, lower, mobile
B) more, higher, mobile
C) more, lower, immobile
D) fewer, lower, immobile
E) more, higher, immobile
3. The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?
A) Imports are only restricted when foreign made goods do not meet domestic standard of quality
B) Import restrictions are the results of trade wars between hostile countries
C) Trade can have substantial effects on a country’s distribution of income
D) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial
E) Restriction on Imports are intended to benefit domestic consumers.
4. In the specific factor model, a country’s production function is ____ because of ____.
A) a curved line, constant marginal returns
B) a curved line, a limited supply of labour
C) a curved line, diminishing marginal returns
D) a straight line, constant marginal returns
E) a straight line, diminishing marginal returns
5. The effect of trade on income distribution
A) is insignificant in the short run
B) is positive for all segments of an economy
C) can be significant in the short run
D) implies that there are no real gains from trade
E) refutes the model of comparative advantage