International Trade

Christian Bjrnskov and Ruby Elorm Agbenyega

Multiple Choice Mid-Term Test

1. Match the growth pattern to the description

Resource based

Catching-up
Endogenous

Malthusian
Economic
isolation

decline
Growth that leads population growth,
which eats the extra income
Technological development that leads to
growth that leads to technological
development that

Growth due to sales of copper, wood etc.

North Korea

Spill-overs of technological development

that leads to growth
 2. Absolute and comparative advantages: which way does trade flow in the examples?
Ex. Land A Land B Ex. Land A Land B Ex. Land A Land B
Good 1 2 4 Good 1 3 6 Good 1 6 4

Good 2 4 2 Good 2 5 10 Good 2 7 4

Example Example Example

Good 1 is sold by A
Good 1 is sold by B
Good 2 is sold by A
Good 2 is sold by B
Uncertain who sells what

3. This question relates to small countries such as Denmark. What are the consequences for the
welfare of the following groups of removing tariffs?
Improvement

Deterioration

Unchanged

Uncertain

Consumers
Producers
The government
 4. This question relates to small countries such as Denmark. What are the consequences for the
welfare of the following groups of removing quotas?

Improvement

Deterioration

Unchanged

Uncertain
Consumers
Producers
The government

5. Two countries allow for trade between them. Two goods are produced using two factors:
labour and capital. The production of one of the goods is intensive in labour (fx. food), the
other in capital (fx. cars). One country is poor and thus rich in labour, the other is rich and
thus rich in capital. What does the Stolper-Samuelson theorem say?

The price of both factors will increase in the poor country

The price of both factors will increase in the rich country
The price of the factor that is used intensively in the production of the good whose
price increases will increase
The price of both factors will decrease both countries
The price of both factors used in the production of the good whose price increases
will increase
 6. Allowing free capital mobility has consequences for the welfare of different groups in
society. Which?

Improvement

Deterioration

Unchanged

Uncertain
Labour in rich countries
Labour in poor countries
Capital owners in rich countries
Capital owners in poor countries
The government in rich countries
The government in poor countries

7. The heterogeneous firm argument implies that:

Random firms export

Only the most productive firms export
Exports are harmful to poor workers
Countries must achieve better vertical integration
Productive firms earn less than other firms