PART A: MULTIPLE CHOICE QUESTION

1. Which of the following statements refers to as Immiserizing Growth?

a. Labor abundant country should produce and export labor intensive products to promote growth

b. A country which enjoys economic growth but reduced welfare

c. A country which enjoys both economic growth and welfare increase

d. An increase in labor resource in a country will lead to a reduction in production of the labor-intensive product.

2. Which of the following ideas is the concern of Leontief Paradox?

a. The United States has enjoyed economic growth during 1947 -1950 but faced reduction in its economic welfare

b. If all individuals increase their savings, the total savings in the economy reduces

c. The United States was considered as capital-abundant country. However, it exported labor-intensive products rather than capital intensive products

d. None of the above

3. Which of the following theories could be used to explain the statement: “The United States is considered as a capital-abundant country. So it produces and exports cars of famous brand names such as Ford, GMC, Chevrolet, etc. However, it still imports cars from Japan”.

a. Stolper –Samuelson Theorem

b. Immiserrizing Growth

c. Heckscher- Ohlin theory

d. Intra-Industry Trade theory

4. A country could become richer and more powerful if it increases exports and restricts imports. Gold and silver are standards of economic development. This refers to as

a. Ricardian model

b. Rybczinski Theorem

c. Hechscher-Ohlin Theory

d. None of the above

5. An increase in the land resource will lead to an increase in the production of Food which is the land-intensive product and decrease in the production of cloth – a labor-intensive product. The theory used to express this statement is:

a. Product-Life Cycle theory

b. Rybczinki theorem

c. Stolper-Samuelson theorem

d. Intra-industry trade theory

6. Which of the following patterns can NOT be explained by the Hecscher-Ohlin theory?

a. Trade based on difference in productivity

b. Trade based on price differences

c. Trade based on product differentiation

d. Trade based on factor abundance

7. Which of the following effects can NOT be explained by the Ricardian model?

a. International trade increases labor income among countries

b. A country can benefit from international trade even if it has no absolute advantage on producing any goods

c. Pattern of international trade is based on difference in productivity among countries.

d. All of the above

8. When the relative price of food increases and food is a land-intensive product,

a. The real labor wage in the Cloth (labor-intensive product) industry increases too

b. The real labor wage in the Food industry increases too

c. The real labor wage in the Cloth industry reduces

d. b and c are correct

9. Beggar-Thy-neighbor way of development is characteristics of

a. Mercantilism

b. Comparative Advantage theory

c. Heckscher-Ohlin theory

d. Rybczinski theory

10. Given the PPF is a curve (not a straight line), when a country specializes in production of a certain product C , the relative price (Pc/Pf) of that product will

a. Increase

b. Reduce

c. Stays unchanged

d. Fluctuate

11. Which of the following statements is NOT correct?

a. Real wage (W/P) = Marginal Product of Labor (MPL)

b. A country is said to have comparative advantage on a certain product if its opportunity cost is lower than that in the other country (two-country case).

c. In the Two-Factor Heckscher-Ohlin Theory, the PPF is assumed to be linear

d. None of the above is correct

12. What theory expresses the positive relation between the relative price of a Cloth and the wage-rental ratio (w/r) in the Cloth industry?

a. Rybczinski theorem b. Immiserizing growth c. Stolper-Samuelson theorem d. Economies of Scale

13. In a labor -hour, Home country can produce either 10 units of Wine or 4 units of Cloth. Foreign country can produce either 6 units of Cloth or 8 units of Wine. Home country is said to have:

a. Absolute advantage in producing Wine b. Absolute advantage in producing Cloth c. Comparative advantage in producing Cloth

d. No advantage in producing both goods

14. Relative price of Cloth to Food (Pc/Pf ) is higher in Home country than that in Foreign country.

a. Home country will specialize in producing and exporting Cloth

b. Home country will specialize in producing and exporting Food

c. Foreign country will specialize in producing and exporting Food

d. There is benefits from international trade