Question

Question 144 pts

Dutch Disease is associated with a dramatic decline in the demand for a primary commodity produced by a country.

True

False

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Question 154 pts

The Heckscher-Olin model uses differences in factor abundance to determine whether any nation has a comparative advantage in any good.

True

False

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Question 164 pts

According to the Ricardian model, the source of comparative advantage is:

differences in the fields of research and development in a country.

differences in foreign trade policies followed by the government of various countries.

differences in labor productivity in different countries.

differences in the taste and preferences of the consumers in different countries.

differences in resource endowments of an economy.

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Question 174 pts

The simultaneous import and export of goods in the same industry by a particular country is known as interindustry trade.

True

False

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Question 184 pts

The export supply curve shows a country’s:

domestic surplus at various prices below the “no-trade” equilibrium price.

domestic supply at the “no-trade” equilibrium price.

domestic shortage at various prices below the “no-trade” equilibrium price.

domestic shortage at various prices above the “no-trade” equilibrium price.

domestic surplus at various prices above the “no-trade” equilibrium price.

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Question 194 pts

The table below shows units of wheat and cloth produced by each worker per day in both the countries.
Table 20.1

Country Good India eat Cloth

Refer to Table 20.1. Which of the following statements is true?

The U.S. has an absolute advantage in the production of both wheat and cloth.

The U.S. has an absolute advantage in the production of wheat but not cloth.

India has an absolute advantage in the production of cloth but not wheat.

India has an absolute advantage in the production of both wheat and cloth.

The U.S. has an absolute advantage in the production of cloth but not wheat.

Answer 1

144. Dutch disease is a concept which refers to the negative impact caused by anything that give rise to the inflow of foreign currency. For example the discovery of a new oil refinery may leads to the large inflow of foreign currency and the appreciation in the value of domestic currency and may leads to the country’s other product is less attractive in foreign market or the appreciation in the value of currency decrease country’s export of other primary commodities and cause these industries to fall. The exploration of North Sea gas in Holland raised the value of Dutch currency and reduces its export and caused the export industries to decline.

Answer: True

154. In Huckster Ohlin theory the difference in factor endowments that gives a comparative advantage in the production of one commodity.

Answer: True

164. The Ricardian theory of international trade is based on the assumption of the labour theory of value. It is the productivity differences of labour that give rise to comparative advantage in production. The comparative advantage arising out of difference in labour productivity is the basis of international trade.

Answer: Differences in labour productivity in different countries.

174. Inter-industry trade and intra-industry are the two concepts belong to international trade.. Under inter-industry trade differentiated products are imported and exported. For example the trade of agricultural products produced in one country with the technological products produced in another country. But in intra-industry trade the same products are imported and exported.

Answer: False

184. A country’s export supply curve shows the quantities of a product that the country is willing to export at the world price that exceeds the domestic price of the product.

Answer: Domestic surplus at various prices above the “no-trade equilibrium price”.

184. The same amount of labour can produce 9 units of wheat in U S but the same amount of labour can produce 4 units of wheat in India. Similarly the same amount of labour produce 3 units of cloth in U S while the same labour can produce 2 units of clothe in India. It means that U S has the absolute advantage in the production of both wheat and cloth.

Answer: The U.S has an absolute advantage in the production of both wheat and cloth.