Theories of international trade MCQ Quiz in বাংলা - Objective Question with Answer for Theories of international trade - বিনামূল্যে ডাউনলোড করুন [PDF]

The correct answer is Both the statements I and II are correct.

Key Points

•  The UNCTAD developed Transnationality Index (TNI), it is a means of ranking multinational corporations that is employed by economists and politicians.
• It is calculated as the arithmetic mean of the following three ratios (where "foreign" means outside of the corporation's home country): the ratio of foreign assets to total assets, The ratio of foreign sales to total sales, the ratio of foreign employment to total employment.
• The Transnationality Index was developed by the United Nations Conference on Trade and Development.

Hence, the correct option is Both the statements I and II are correct.

The correct answer is A ‐ I, B ‐ IV, C ‐ III, D ‐ II

Key Points The correct match is given below:

Important Points

Supply-side economics

• Supply-side economics holds that increasing the supply of goods translates to economic growth for a country.
• In supply-side fiscal policy, practitioners often focus on cutting taxes, lowering borrowing rates, and deregulating industries to foster increased production.

Demand side Economics:

• Demand-side economics hold that demand for goods and services drives economic growth.
• Supply-side economics (also known as classical economic theory) states that the production of goods and services is the main force driving economic growth.

Opportunity cost:

• With the help of this theory, Haberler tries to explain the theory of comparative advantage of international trade on the basis ofopportunity cost.
• In Haberler's words, "the marginal cost of a given quantity (x) of a commodity, say, A must be regarded as the quantity of commodity, say, B must be forgone in order that X, instead of (X-1) units of A can be produced. The exchange ratio on the market between A and B must equal their costs in this sense of the terms."
• According to the opportunity cost theory, the cost of a commodity is the amount of a second commodity that must be given up to release just enough resources to produce one additional unit of the fixed commodity

The correct answer is Factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry.

Key Points The Porter's Diamond Model, developed by Harvard economist Michael Porter, identifies four key determinants that influence a nation's competitive advantage. These determinants are:

• Factor Conditions: These refer to the nation's endowments in terms of resources such as skilled labor, infrastructure, capital, and natural resources. High-quality factor inputs can create a competitive advantage.
• Demand Conditions: The nature of domestic demand for a country's products or services can drive companies to innovate and upgrade. Sophisticated and demanding customers can push companies to improve their products and services, making them more competitive globally.
• Related and Supporting Industries: The presence of internationally competitive supplier industries and related industries that are supportive in terms of technology, skills, and knowledge can enhance the competitiveness of firms within an industry. Collaboration and strong linkages between different industries can create synergies and foster innovation.
• Firm Strategy, Structure, and Rivalry: The conditions governing how companies are created, organized, and managed, as well as the nature of domestic competition, influence a nation's competitive advantage. Intense domestic rivalry can drive firms to improve efficiency, quality, and innovation, making them more competitive on the global stage.

These four factors are interrelated and mutually reinforcing. Porter's Diamond Model provides a framework for understanding why certain industries and firms within a nation become more competitive on the global market, taking into account both internal and external factors that shape a nation's competitive advantage.

 International trade theories are simply different theories to explain international trade. Trade is the concept of exchanging goods and services between two people or entities. International trade is then the concept of this exchange between people or entities in two different countries.

Different International Trade Theories are as follow:

Thus, option 2 is the correct answer.

. Specializing in the production of things that individual/companies are relatively good at and trading with others who specialize in what they are relatively good - is the correct answer. This is a situation when nations’/firms’ strengths and weaknesses become beneficial for one
another and all get benefitted.

Key Points

•  Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade.
• When used to describe international trade, comparative advantage refers to the products that a country can produce more cheaply or easily than other countries.
• While this usually illustrates the benefits of trade, some contemporary economists now acknowledge that focusing only on comparative advantages can result in the exploitation and depletion of the country's resources.

The correct answer is Product Variety.

Key Points Product variety is not an element of trade relations mix in international business.

Trade relations mix is a set of policies and strategies that a company uses to manage its international trade. It includes the following elements:

• Export strategy: This refers to the company's strategy for selling its products or services in foreign markets.
• Import strategy: This refers to the company's strategy for buying products or services from foreign suppliers.
• Tariffs: These are taxes that are imposed on imported goods.
• Quotas: These are limits on the amount of goods that can be imported from a particular country.
• Exchange rates: These are the prices of one currency in terms of another.

Additional Information Product variety is not an element of trade relations mix because it is not a policy or strategy. It is a characteristic of a product or service. A company can have a wide variety of products or services, but it can also have a narrow variety. The product variety does not affect the company's trade relations mix.

The correct answer is There are transportation costs for shipping goods from one country to another.

Key Points

•  International trade refers to the process of exchanging goods/ services across the international territories.
• There are various theories of International Trade, such as: Mercantilism Theory, Absolute Cost Advantage Theory, Comparative Cost Advantage Theory etc.
• Mercantilism Theory: This theory is based on the idea that, it is gold and silver which reflects the national wealth of a country. It emphasize on self sufficiency concept through a favourable balance of trade by exporting more goods for accumulating gold and silver.

Important Points

• Absolute Advantage Theory: This theory was propounded by Adam Smith in 1776. As per the principle of absolute advantage, each nation always has a distinct edge over another in the production of some specific good/ service.
• Assumptions of Absolute Advantage theory are:
  • There are just two nations producing just two goods.
  • When one has completely cheap cost of producing one good, the trade will occur. 
  • Labour cost becomes the base for calculating the cost of commodity.
  • There are no taxes.
  • There is no transportation cost for shipping products from one country to another country.
• Comparative Advantage Theory: This theory of international trade was developed by David Ricardo in 1817.The ability of a party to produce a certain commodity or service at a lower marginal and opportunity cost than another is known as comparative advantage.
• Assumptions of Comparative Advantage theory are:
  • There are just two nations producing two goods.
  • There is absence of transportation cost.
  • Labour is the only factor of production.
  • Countries are driven by maximization of the production and consumption.

Additional Information The Theory of Absolute and Comparative Advantage, developed by economists Adam Smith and David Ricardo, is based on certain key assumptions. These assumptions include:

Full employment: The theory assumes that all resources within an economy are fully employed, meaning there is no unemployment or underutilization of resources.

Fixed resources: It assumes that the quantities of labor, capital, and other factors of production available within an economy are fixed and do not change during the period of analysis.

Two countries, two goods: The theory simplifies the analysis by considering only two countries and two goods being produced. This allows for a clear comparison of production capabilities and advantages between the two countries.

Constant costs: The theory assumes that the costs of production, such as labor and materials, remain constant regardless of the quantities produced. This assumption allows for a simplified analysis of comparative advantage.

No transportation costs or trade barriers: It assumes that there are no transportation costs or trade barriers between countries, meaning goods can be freely traded without any additional costs or restrictions.

Hence, the correct answer is There are transportation costs for shipping goods from one country to another.

The correct answer is MillKey PointsTheory of Reciprocal Demand and Terms of Trade

• J.S. Mill’s theory of reciprocal demand explains how trade takes place. 
• It states that a comparative difference in cost ratios sets the limits within which participating countries can import and export goods and commodities. 
• This theory was derived from the Ricardian theory of comparative advantage.
• MIll's theory states how much a country should import or export which was not explained by Ricardo.

Additional Information Ricardian theory of comparative advantage

• This theory states that countries will benefit from trade even if one country has an absolute advantage 
• As under absolute advantage, a country specializes in producing and exporting the goods and services for which it has a lower comparative opportunity cost. 
• Theory states that trade is driven by differences in labor productivity and the cost of production

Hence Option3 is the correct answer.

The correct answer is Brazil.

Key Points The founding members of OPEC are Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.

The following countries are not founding members of OPEC:

• Angola
• Algeria
• Ecuador
• Indonesia
• Libya
• Nigeria
• Qatar
• United Arab Emirates

The five founding members of OPEC met in Baghdad, Iraq on September 10-14, 1960 to discuss ways to stabilize the oil market and protect the interests of oil-producing countries. The organization was formally constituted on January 1, 1961.

OPEC has since grown to include 13 member countries. The most recent member to join OPEC was the Republic of the Congo in 2018.