All Free Economics MCQs with Answers
Every Economics question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
4,037 questions · page 128 of 202
- A. Trades at Canada's marginal rate of transformation
- B. Trade at Sweden's marginal rate of transformation
- C. Specializes completely in the production of its export good
- D. Specializes partially in the production of its exports goods
Explanation: Trade produces gains when the international terms of trade differ favourably from a country’s own marginal rate of transformation.
Correct answer: Trades at Canada's marginal rate of transformation- A. below the production possibility frontier
- B. on the production possibility frontier
- C. above the production possibility frontier
- D. can't tell without more information
Explanation: A community cannot maximize its standard of living while leaving resources idle, so its production must be efficient and lie on the…
Correct answer: on the production possibility frontier- A. below the production possibility frontier
- B. On the production possibility frontier
- C. above the production possibility frontier
- D. can't tell without more information
Explanation: Under autarky, the community consumes what it produces because it does not trade with other countries.
Correct answer: On the production possibility frontier- A. constant opportunity costs
- B. decreasing opportunity costs
- C. first increasing and then decreasing opportunity costs
- D. increasing opportunity costs
Explanation: A linear production possibilities frontier has a constant slope, meaning that the same quantity of one good must always be sacrificed to…
Correct answer: constant opportunity costs- A. actual differences in labor productivity between countries
- B. relative differences in labor productivity between countries
- C. Both (a) and (b)
- D. Neither (a) nor (b)
Explanation: Comparative advantage depends on relative opportunity costs, which arise from comparing productivity ratios between countries rather than…
Correct answer: relative differences in labor productivity between countries- A. Absolute advantage
- B. Comparative advantage
- C. Physical advantage
- D. Which way the wind blows
Explanation: Ricardo's model explains trade through comparative advantage, meaning each country specializes in the good it can produce at a lower…
Correct answer: Comparative advantage- A. The labor theory of value
- B. How much the autarky price differs from international terms of trade change
- C. The fact that a country must lose from trade
- D. All of the above
Explanation: Trade gains are linked to the difference between a country's autarky opportunity-cost price and the international terms of trade.
Correct answer: How much the autarky price differs from international terms of trade change2548. Mercantilism ?
- A. Is the philosophy of free international trade?
- B. Was a system of export promotion and barriers to imports practiced by governments?
- C. Was praised by Adam Smith in the Wealth of Nations
- D. Both (a) and (c)
Explanation: Mercantilism promoted exports and restricted imports through government intervention, with the aim of accumulating national wealth and…
Correct answer: Was a system of export promotion and barriers to imports practiced by governments?- A. There is no basis for gainful trade for either country
- B. Both countries gain from trade
- C. Only one country gains from trade
- D. One country gain and the other country loses from trade
Explanation: When the international terms of trade lie between the two countries' opportunity costs, each country can export the good in which it has…
Correct answer: Both countries gain from trade- A. Adam Smith
- B. David Ricardo
- C. Eli Heckscher
- D. Berti IOhlin
Explanation: David Ricardo gave the earliest systematic statement of comparative advantage in his analysis of trade between England and Portugal.
Correct answer: David Ricardo- A. evidence against the classical model
- B. evidence against the Heckscher-Ohlin model
- C. Support for the Ricardian modal
- D. Support for the Heckscher-Ohlin model
Explanation: MacDougall found that countries with higher labor productivity tended to export more, which is consistent with the Ricardian model's…
Correct answer: Support for the Ricardian modal- A. Ricardian theory of comparative
- B. Heckscher Ohl in theory of comparative advantage
- C. Linder theory of overlapping demand all of the above
- D. None of these
Explanation: MacDougall compared U.S. and U.K. export patterns with relative labour productivity as an empirical test of Ricardo’s…
Correct answer: Ricardian theory of comparative- A. Theory of reciprocal demand
- B. Theory of absolute advantage
- C. Theory of comarative advantage
- D. Theory of mercantilism
Explanation: John Stuart Mill developed the theory of reciprocal demand, which explains how international demand determines the terms of trade between…
Correct answer: Theory of reciprocal demand2554. If the autarky price of S were lower in country A than in country B then if trade were allowed ?
- A. A would likely export S to B
- B. A would likely import S from B
- C. neither country would want to trade
- D. None of the above
Explanation: A lower autarky price of S in country A indicates that A can produce S at a lower opportunity cost than B.
Correct answer: A would likely export S to B2555. In autarky equilibrium ?
- A. Production equals consumption
- B. Exports equal imports
- C. there is no trade
- D. All of the above
Explanation: Under autarky there is no international trade, so exports and imports are both zero.
Correct answer: All of the above- A. Are more productive than their large trading partners
- B. Are less productive than their large trading partners
- C. Have demand preferences and income levels lower than their large trading partners
- D. Realize terms of trade lying near the MRTs of their large trading partners
Explanation: A small country cannot significantly influence world prices, so its terms of trade are close to the large partner’s internal relative…
Correct answer: Realize terms of trade lying near the MRTs of their large trading partners- A. Paid for all goods exported by the home country
- B. Received for all goods exported by the home country
- C. Received for exports and paid for imports
- D. Of primary products as opposed to manufactured products
Explanation: The terms of trade are measured as the price index of exports divided by the price index of imports.
Correct answer: Received for exports and paid for imports- A. constant opportunity costs
- B. decreasing opportunity costs
- C. first increasing and then decreasing opportunity costs
- D. increasing opportunity costs
Explanation: A bowed-out PPF reflects increasing opportunity cost: producing additional units of one good requires giving up progressively more of the…
Correct answer: increasing opportunity costs- A. shift out in a parallel fashion
- B. shift in a parallel fashion
- C. Become steeper
- D. Become flatter
Explanation: The slope of the price line reflects the relative price, or MRT, of S in terms of T.
Correct answer: Become steeper- A. actual differences in labor production between countries
- B. relative differences in labor productivity between countries
- C. Both (a) and (b)
- D. Neither (a) nor (b)
Explanation: Absolute advantage is based on an absolute productivity comparison, such as how much labor output differs between countries.
Correct answer: actual differences in labor production between countries