### International Economics MCQ Test - 2: The Pure Theory of International Trade - Supply

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1. The opportunity cost theory assumes that

1. labor is the only factor of production

2. the price or cost of a commodity can be inferred from its labor content

3. labor is homogeneous

4. none of the above

2. with respect to a production possibilities curve, we can say that

1. a point inside or below it implies that the economy is either not fully utilizing all of its resources or not using the best technology available to it

2. a point on it involves the full employment of the economy's resources and the use of the best technology available

3. a point above it cannot be reached with the resources and technology presently available to the nation

4. all of the above

3. A straight-line production possibilities curve refers to

1. constant costs

2. increasing costs

3. decreasing costs

4. any of the above

4. With cloth measured along the horizontal axis and wheat along the vertical axis, the absolute slope of a straight-line production possibilities curve gives

1. $${\rm{the MR}}{{\rm{T}}_{CW}}$$

2. $${\rm{the }}{{\rm{p}}_c}/{p_w}$$

3. $${\rm{both the MR}}{{\rm{T}}_{CW}}{\rm{ and the }}{{\rm{P}}_C}/{P_W}$$

4. $${\rm{ neither the MR}}{{\rm{T}}_{CW}}{\rm{ nor the }}{{\rm{P}}_C}/{P_W}$$

5. If in the absence of trade the internal equilibrium $${P_C}/{P_W}$$ is lower in the U.K. than in the U.S., then

1. the U.K. has a comparative advantage in cloth with respect to the U.S.,

2. the U.K. has a comparative disadvantage in wheat

3. the U.S. has a comparative advantage in wheat

4. the U.S. has a comparative disadvantage in cloth

5. all of the above

6. The production frontier for the U.K. in Fig. 2-2 is given by the straight line through points

1. A and B in the absence of trade, E and B with trade

2. A and B with trade, and E and B without trade

3. E and B with and without trade

4. A and B with and without trade

7. If a nation gains from trade, its consumption point is

1. on its production possibilities frontier

2. inside its production possibilities frontier

3. above its production possibilities frontier

4. any of the above

8. Increasing opportunity costs to produce more and more units of a commodity are given by a production possibilities curve that is

1. concave to the origin

2. convex to the origin

3. a straight line

4. any of the above

9. With cloth measured along the horizontal axis and wheat along the vertical axis, the absolute slope of a concave production possibilities curve gives

1. $${\rm{the MR}}{{\rm{T}}_{CW}}$$

2. the internal equilibrium $${P_C}/{P_W}$$ in isolation

3. both the $${\rm{MR}}{{\rm{T}}_{CW}}$$ and the internal equilibrium $${P_C}/{P_W}$$

4. neither the $${\rm{MR}}{{\rm{T}}_{CW}}$$ nor the internal equilibrium $${P_C}/{P_W}$$

10. With cloth measured along the horizontal axis and wheat along the vertical axis, a movement down the production possibilities curve results in

1. a decrease in $${\rm{MR}}{{\rm{T}}_{CW}}$$

2. an increase in $${\rm{MR}}{{\rm{T}}_{CW}}$$

3. an increase in $${\rm{MR}}{{\rm{T}}_{CW}}$$

4. any of the above

11. With trade, specialization in production is likely to be

1. complete with increasing costs and incomplete with constant costs

2. complete with constant costs and incomplete with increasing costs

3. complete with constant and increasing costs

4. incomplete with both constant and increasing costs

12. A difference in relative commodity prices between two nations can be based upon a difference in

1. factor endowments

2. technology

3. tastes

4. all of the above