4. International Economics

Trade Theory — Quiz

Test your understanding of trade theory with 5 practice questions.

Practice Questions

Question 1

In the Ricardian model, if a country’s unit labor requirements are \$a_{LC}=2\$ and \$a_{LW}=3\$, what is its autarky relative price of cloth in terms of wine, \$P_C/P_W\$?

Question 2

Country A specializes fully in cloth and produces 80 units. If the world relative price is \$P_C/P_W=0.7\$, how many units of wine can it consume by trading all cloth exports?

Question 3

A small country imposes an ad valorem tariff of 20% on imports. If the world price is \$10 and import volume is 200 units, what is the government’s annual tariff revenue?

Question 4

According to the Stolper–Samuelson theorem, an increase in the price of the labor‐intensive good will ____ the real return to labor and ____ the real return to capital.

Question 5

In the Heckscher–Ohlin model, if a country’s capital endowment rises (with goods prices constant), output of the capital‐intensive good will ____ and output of the labor‐intensive good will ____.