International Economics MCQs and Notes

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📊 International Economics
Q. According to the Heckscher - Ohlin model, if the United States is richly endowed in human capital relative to Mexico, then as NAFTA increasingly leads to more bilateral free trade between the two countries,
  • (A) The United States will find its industrial base sucked into Mexico
  • (B) Mexico will find its relatively highly skilled workers drawn to the United States
  • (C) The wages of highly skilled U.S. workers will be drawn down to Mexican levels
  • (D) The wages of highly skilled Mexican workers will rise to those in the United States.
💬 Discuss
✅ Correct Answer: (D) The wages of highly skilled Mexican workers will rise to those in the United States.
📊 International Economics
Q. Countries H and F operate in an H-O world. Each country produces two goods, A and B. Good A is relatively capital intensive and country F is relatively labor abundant. Suppose however, that the production technology is not the same in the two countries. That is, H has a superior technology of production compared to F.
  • (A) Free trade will equalize wages between the two countries
  • (B) In free trade, there will be no incentive for migration of labor from H to F.
  • (C) In free trade there will be some incentive for workers from F to migrate to H.
  • (D) Both b. and c.
💬 Discuss
✅ Correct Answer: (D) Both b. and c.
📊 International Economics
Q. According to the Heckscher-Ohlin model
  • (A) Everyone automatically gains from trade
  • (B) The gainers from trade outnumber the losers from trade
  • (C) The scarce factor necessarily gains from trade
  • (D) None of the above
💬 Discuss
✅ Correct Answer: (B) The gainers from trade outnumber the losers from trade
📊 International Economics
Q. The Heckscher-Ohlin model rules out the classical model’s basis for trade by assuming that________ is (are) identical between countries.
  • (A) Factor endowments
  • (B) Factor intensities
  • (C) Technology
  • (D) Opportunity costs
💬 Discuss
✅ Correct Answer: (C) Technology
📊 International Economics
Q. According to the Heckscher-Ohlin model, the source of comparative advantage is a country’s:
  • (A) Technology
  • (B) Advertising
  • (C) Factor endowments
  • (D) Both (a) and (c)
💬 Discuss
✅ Correct Answer: (C) Factor endowments
📊 International Economics
Q. According to the factor endowment model of Heckscher and Ohlin, countries heavil y endowed with land will:
  • (A) Devote excessive amounts of resources to agricultural production.
  • (B) Devote insufficient amounts of resources to agricultural production
  • (C) Export products that are land-intensive.
  • (D) Import products that are land-intensive.
💬 Discuss
✅ Correct Answer: (C) Export products that are land-intensive.
📊 International Economics
Q. The trade model of the Swedish economists Heckscher and Ohlin maintains that:
  • (A) Absolute advantage determines the distribution of the gains from trade
  • (B) Comparative advantage determines the distribution of the gains from trade.
  • (C) The division of labor is limited by the size of the world market
  • (D) A country exports goods for which its resource endowments are most suited.
💬 Discuss
✅ Correct Answer: (D) A country exports goods for which its resource endowments are most suited.
📊 International Economics
Q. In free trade between two countries in an H-O world:
  • (A) If both countries produce both goods, wages in the two countries will be the
  • (B) same.
  • (C) If one country does not produce both goods, wages in the two countries will be the same
  • (D) The world relative price is between the two-self-sufficiency relative Prices but the relative Price of a good would not be exactly the same in both countries
💬 Discuss
✅ Correct Answer: (A) If both countries produce both goods, wages in the two countries will be the
📊 International Economics
Q. The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former
  • (A) Has only two countries
  • (B) Has only two products.
  • (C) Has two factors of production.
  • (D) Has two production possibility frontiers (one for each country).
💬 Discuss
✅ Correct Answer: (C) Has two factors of production.
📊 International Economics
Q. The Heckscher-Ohlin model predicts all of the following except:
  • (A) Which country will export which product
  • (B) Which factor of production within each country will gain from trade.
  • (C) The volume of trade.
  • (D) That wages will tend to become equal in both trading countries.
💬 Discuss
✅ Correct Answer: (C) The volume of trade.

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