Economic Development 7.
The theory that refers to oligopoly and
Chapter 7- International trade and Investment
1. The types of gains from international trade.
A. Consumption and production gains.
B. Consumption possibilities gain and production
possibilities gain.
C. Capital investment gains and return on invested
capital.
D. Marginal returns gains and investment gains.
2. States that the differences in technology
determine comparative advantage.
A. Hecksher-Ohline (H-O) theorem.
B. Ricardian theory.
C. Theory of imperfect competition.
D. Theoru of comparative advantage.
3. The theory that considers the units of labor or
labor hours required to produce a unit of a
commodity:
A. Hecker-Ohline (H-O) theorem.
B. Ricardian theory.
C. Theory of imperfect competition
D. Theory of comparative advantage.
4. States that countries will specialize and trade in
goods which are relatively abundant:
A. Hecker-Ohline (H-O) theorem.
B. Ricardian theory
C. Theory of imperfect competition.
D. Theory of comparative advantage.
5. This theory further statest that labor-rich
countries will specialize in the production of
labor-intensive products while countries with
abundant capital relative to labor will specialize
and trade in commodities that are capital-
intensive intensive in nature.
A. Hecker-Ohline (H-O) theorem.
B. Ricardian theory.
C. Theory of imperfect competition.
D. Theory of comparative advantage.
6. Theories that establish a linkage between
economic efficiency, factor endowments, and the
direction of international trade:
A. Hecker-Ohline (H-O) theorem.
B. Ricardian theory.
C. Theory of imperfect competition.
D. A and B.
E. A and C
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monopoly:
A. Hecker-Ohline (H-O) theorem.
B. Ricardian Theory.
C. Theory of imperfect competition.
D. Theory of absolute advantage.
8. In this theory the direction of intra-industry trade
is determined largely by the differences in
relative factor endowments, while production
differentiation and relative market size determine
the volume and composition of international
trade.
A. Hecker-Ohline (H-O) theorem.
B. Ricardian theory.
C. Theory of imperfect competition.
D. Theory of comparative advantage.
9. Which of the following is/are true in the
evolution of trade?
A. Trade is greatest between countries that have
the least differences in economic structure.
B. Factor prices tend to be more equal as
trade takes place based on the factor price
equalization theorem.
C. Factor prices tend to be unequal as trade
takes place based on the factor price
equalization theorem.
D. A & B.
E. A & C.
10. The share of export between industrial countries
in year 2004:
A. Industrial countries : 63.1% ; Developing
economies: 36.9%
B. Industrial countries: 59.9%;
Developing economies: 40.1%
C. Industrial countries: 73.8%; Developing
economies: 26.3%
D. Industrial countries: 70.5%; Developing
economies 29.5%
 11. The “Flying Geese” Development Paradigm is a
general principle for development by Kaname
Akamatsu (1961). This model resembles the 5-
stage “product cycle theory”. Stage 1 of the
product cycle theory is characterized by:
A. Imposition of import-substitution policies
and small foreign direct investment interests.
B. Product introduction through imports
from an industrialized country;
responsiveness of consumers and increase
in demand that induces domestic
production.
C. Upon maturity, production slows down.
D. Foreign Direct Investment declines.
12. Stage 5 of the “product cycle theory” is
characterized by:
A. Slow down of production and exports.
B. Decline of the foreign direct investment.
C. Reduction of protection by the
government.
D. Imposition of Import-substitution policies.
13. The percentage at which the value-added of a
product at a particular stage of processing in a
domestic industry can exceed than when it has
there is no protection:
A. Effective rates of production.
B. Effective rates of exchange.
C. Effective balance of trade.
D. None of the above. (Protective rates of
protection)
14. Increased productivity from manufactured
exports is a key issue in international trade. This
could be achieved via:
A. Productivity change as a result of domestic
effort.
B. Inward-oriented trade policies
C. Foreign trade policies.
D. Ability to tap the best practices of world
technology and business practices and
business network.
E. Increased import volume.
15. Currency exchange rate directly affects the
profitability of firms producing for the
international market. As such, currency
exchange rate is by far the most important factor
in deciding trade policy.
A. The first and second statements are true.
B. The first and second statements are false.
C. The first statement is true. The second
statement is false.
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D. The first statement is false. The second
statement is true.
16. The demand for imports declines as domestic
prices increase due to tax. As the demand falls
the demand for foreign currency:
A. Increases.
B. Decreases.
C. Remains constant.
D. Cannot be determined.
17. When the demand for foreign currency falls,
what happens to the currency?
A. The currency appreciates.
B. The currency depreciates.
C. No movement.
D. Difficult to predict if it appreciates,
depreciates or remains the same.
18. What could be the reasons for the increase in
share of intra-Asian trade in the total Asian
trade?
A. There has been a stable exchange rate.
B. There has been a rapid growth of regional
cooperation arrangements that have
facilitated trade.
C. Trade between countries that are close to
each other is more likely to happen.
D. A & B.
E. B & C.
19. There has been a shift in the commodity
composition of international trade where exports
moved from light manufacturing to heavy
manufacturing. Among the light products are
textile, paper, and wood, while heavy products
consist of telecommunications equipment.
A. The first and second statements are true..
B. The first and second statements are false.
C. The first statement is true. The second
statement is false.
D. The first statement is false. The second
statement is true.
20. The Foreign Trade Agreement (FTA) are trade
agreements that include preferential tariffs for
products that are produced in the countries that
meet country of origin rules. Among these FTAs
is the NAFTA. The NAFTA stands for:
A. North America Foreign Trade Association.
B. North America Free Trade Association.
C. North America Foreign Trade Agreement.
D. North America Free Trade Agreement.
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