Below are examples from the file.
1. In the country of Zana, a unit of labor can produce 4 units of good X or 2 units of
good Y; in the country of Bren, a unit of labor can produce 2 units of good X or 1
unit of good Y. Which of the following is true?
a. Bren has absolute advantage in producing both goods X and Y.
b. Bren has comparative advantage in producing good Y.
c. Zana has comparative advantage in producing good Y.
d. Bren should export good X to Zana.
e. Bren and Zana cannot benefit from trading with each other.
2. Assuming that Country A has a comparative advantage in wheat and Country B in
wine, which of the following is true?
a. The price of wheat in country B falls when trade opens between the two
countries.
b. The price of wine in country B falls when trade opens between the two
countries.
c. The prices of wine and wheat in country B fall when trade opens between the
two countries.
3. According to the Heckscher-Ohlin theorem, trade arises are due to
a. Differences in technology.
b. Differences in relative factor endowments and intensities.
c. Differences in tastes and preferences.
d. The existence of economies of scale in production.
4. Based on the trade theories, which of the following statement is NOT true?
a. Trade occurs because of differences in the availability of factor inputs across
countries and differences in the proportions of those factor inputs used in
producing different products.
b. Trade causes expansion in the export-oriented sector and causes contraction
in the import-competing sector.
c. Trade allows a trading nation to consume beyond its production capacity.
d. Trade benefits everyone or every group within a trading nation.
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