1Chapter 5 The Standard Trade Model
1⏹ Multiple Choice Questions
1. The concept “terms of trade〞 means
(a) the amount of exports sold by a country.
(b) the price conditions bargained for in international markets.
(c) the price of a country’s exports divided by the price of its imports.
(d) the quantities of imports received in free trade.
(e) None of the above.
Answer: C
2. A country cannot produce a mix of products with a higher value than where
(a) the isovalue line intercts the production possibility frontier.
(b) the isovalue line is tangent to the production possibility frontier.
(c) the isovalue line is above the production possibility frontier.
(d) the isovalue line is below the production possibility frontier.
(e) the isovalue line is tangent with the indifference curve.
Answer: B
3. Tastes of individuals are reprented by
(a) the production possibility frontier.
(b) the isovalue line.
(c) the indifference curve.
(d) the production function.
(e) None of the above.
Answer: C
4. If PC/PF were to increa in the international marketplace, then
(a) all countries would be better off.
(b) the terms of trade of cloth exporters improve.
(c) the terms of trade of food exporters improve.
(d) the terms of trade of all countries improve.
(e) None of the above
Answer: B
5. If PC/PF were to increa,
(a) the cloth exporter would increa the quantity of cloth exports.
(b) the cloth exporter would increa the quantity of cloth produced.
(c) the food exporter would increa the quantity of food exports.
(d) Both (a) and (c).
(e) None of the above.
Answer: B
6. If PC/PF were to increa,
(a) world relative quantity of cloth supplied and demanded would increa.
(b) world relative quantity of cloth supplied and demanded would decrea.
(c) world relative quantity of cloth supplied would increas.
(d) world relative quantity of cloth demanded would decrea.
(e) None of the above.
Answer: C
7. When the production possibility frontier shifts out relatively more in one direction, we have
(a) biad growth.
(b) unbiad growth.
(c) immirizing growth.
(d) balanced growth.
(e) imbalanced growth.
Answer: A
8. Export-biad growth in Country H will
(a) improve the terms of trade of Country H.
(b) trigger anti-bias regulations of the WTO.
(c) worn the terms of trade of Country F (the trade partner).
(d) improve the terms of trade of Country F.
(e) decrea economic welfare in Country H.
Answer: D
9. Immirizing growth is
(a) likely to occur if the exporting country is poor.
(b) likely to occur if the exporting country is rich.
(c) likely to occur when terms of trade change.
(d) likely to occur if relative supplies are elastic.
(e) None of the above.
Answer: E
10. If the U.S. Agency for International Development transfers funds to poor countries in Sub-Saharan Africa, this must
(a) worn the U.S. terms of trade.
(b) improve the U.S. terms of trade.
(c) worn the terms of trade of the African aid recipients.
(d) improve the terms of trade of the African aid recipients.
(e) None of the above.
Answer: E
11. If the poor USAID recipient countries have a higher marginal propensity to consume each and every product than does the United States, then such aid will
(a) worn the U.S. terms of trade.
(b) improve the U.S. terms of trade.
(c) leave the world terms of trade unaffected.
(d) worn the terms of trade of both donor and recipient countries.
(e) None of the above.
Answer: B
12. If the U.S. has a higher marginal propensity to consume (MPC) imports as compared to both its MPC for exportables and nontradables, then such aid will
(a) worn the U.S. terms of trade.
(b) improve the U.S. terms of trade.
(c) leave the world terms of trade unaffected.
(d) worn the terms of trade of both donor and recipient countries.
(e) None of the above.
Answer: B
13. If the U.S. (a large country) impos a tariff on its imported good, this will tend to
(a) have no effect on terms of trade.
(b) improve the terms of trade of all countries.
(c) improve the terms of trade of the United States.
(d) cau a deterioration of U.S. terms of trade.
(e) rai the world price of the good imported by the United States.
Answer: C
14. If the U.S. (a large country) impos a tariff on its imported good, this will
(a) have no effect on economic welfare.
(b) improve the terms of trade of all countries.
(c) improve the economic welfare of the United States.
(d) harm the economic welfare of U.S.’ trading partners.
