International Trade Theory Quiz

Multiple Choice Questions

Comparative Advantage and Trade Theories

• The Balassa index measures comparative advantages and can be linked to a classical trade theory.
• The Leontief paradox was a test of the Heckscher-Ohlin theory and concluded that the US imported capital-intensive goods.
• Technological differences and multiple countries are two relaxations of the Heckscher-Ohlin (HO) model, which increased its explanatory power.
• Examining the lobbying and voting behavior of different sectors in relation to free trade and protectionism served to support the Heckscher-Ohlin-Vanek (HOV) model.

Gains from Trade

• Countries will gain from trade because world output will increase if each country specializes in what it is relatively best at.
• Specialization leads to increased output per worker in every company.

Temporary Comparative Advantage

• The question gap with R&D efforts leads to a temporary comparative advantage.
• The first phase in the production of a new, expensive product often takes place in capital-rich, high-wage countries.
• In the saturation phase of the product life cycle, production processes have been standardized.

Theory of Similar Demand

• Imports in a country are determined by GDP/capita, according to the theory of similar demand by Linder.
• Demand in a country is determined by GDP/capita.
• Exports to countries with similar GDP/capita as the country of origin are proposed by the theory.