ASRB NET and ARS / SMS / STO recruitment · India · Agricultural Scientists Recruitment Board (ICAR)
Original practice questions written to the published syllabus · not past papersWhy countries trade, how trade is measured and regulated, and how an agribusiness actually exports.
In the exams: agricultural economics PhD entrance and fellowship examinations, trade (heavy); agribusiness management PhD entrance and fellowship examinations, international marketing (heavy); agricultural master's entrance examinations, WTO and trade (present)
How our questions for ASRB NET and ARS / SMS / STO recruitment spread across the units of International Agri Trade & Export Management. Difficulty: 3 easy, 28 medium, 33 hard.
| Tariffs and non-tariff measures | 15 | |
| WTO Agreement on Agriculture and its boxes | 7 | |
| Heckscher-Ohlin factor-endowment theory | 6 | |
| Leontief paradox | 6 | |
| Anti-dumping | 6 | |
| Product life-cycle theory of trade | 5 | |
| Exchange rates | 5 | |
| Absolute and comparative advantage | 4 | |
| Balance of payments | 4 | |
| TRIPS, TRIMs, SPS and TBT agreements | 3 | |
| Porter's diamond | 1 | |
| International marketing mix | 1 | |
| Market-entry modes | 1 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
Country A has 100 units of capital and 50 of labour; country B has 60 units of each. By the physical definition of factor abundance:
B. A is capital-abundant and should export the capital-intensive good
Compare ratios, not totals: K/L is 100/50 = 2 in A and 60/60 = 1 in B, so A is relatively capital-abundant and, under H-O, exports the capital-intensive good.
Further reading: Salvatore, International Economics
Leontief's test used which data?
C. The 1947 input-output table of the United States
Leontief applied his input-output method to the 1947 US table, publishing in 1953. The other data sets are unrelated to his test.
Further reading: Salvatore, International Economics
A country exports cheese worth 60 million and imports cheese worth 40 million. The Grubel-Lloyd index of intra-industry trade in cheese is:
C. 0.8
GL = 1 − |X − M|/(X + M) = 1 − 20/100 = 0.8. 0.2 is the net trade share alone; 0.5 and 1.5 come from dividing 60 by 40 or similar slips. The index lies between 0 (one-way) and 1 (fully two-way).
Further reading: Grubel and Lloyd (1975)
New trade theory, associated with Krugman, explains trade between countries with similar endowments mainly through:
A. Increasing returns to scale and product differentiation
Under monopolistic competition, scale economies make each country specialise in some varieties and trade them for others, generating intra-industry trade. Productivity and endowment differences are the Ricardian and H-O explanations.
Further reading: Krugman, Obstfeld and Melitz, International Economics
With the nominal rate E = 80 (domestic per foreign), foreign price level 110 and domestic price level 120, the real exchange rate (E × P*/P) is:
C. 73.3
RER = 80 × 110/120 = 73.3. 87.3 inverts the price ratio (80 × 120/110); 80 ignores prices; 96 multiplies by 120/100.
Further reading: Krugman, Obstfeld and Melitz, International Economics
For a large importing country, the optimum tariff equals the reciprocal of the foreign export-supply elasticity. If that elasticity is 4, the optimum tariff is:
C. 25%
t* = 1/ε = 1/4 = 25%. The gain comes from lowering the world price (terms-of-trade gain) and invites retaliation. With perfectly elastic foreign supply (small country) the optimum tariff is zero. 400% treats the elasticity itself as the rate, and 75% is 1 - 1/ε.
Further reading: Krugman, Obstfeld and Melitz, International Economics
In the export-subsidy example (Qs = 4P − 100, Qd = 300 − P, world price 100, subsidy 20), the net national welfare change is:
D. A loss of 1,000
Producer gain (300 + 380)/2 × 20 = 6,800; consumer loss (200 + 180)/2 × 20 = 3,800; treasury cost 4,000. Net = 6,800 − 3,800 − 4,000 = −1,000 (triangles 800 + 200). 3,000 ignores the treasury cost; 4,000 is the cost alone.
Further reading: Salvatore, International Economics
Tariff escalation refers to:
D. Tariffs that rise with the degree of processing of a product
Low duties on raw materials and higher duties on processed products give processors in importing countries high effective protection and discourage processing in exporting countries. Volume-linked rates describe a TRQ or safeguard.
Further reading: Salvatore, International Economics
An OECD country has a producer support estimate of 30 against gross farm receipts (including support) of 150. The %PSE is:
D. 20%
%PSE = PSE/gross farm receipts including support = 30/150 = 20%. 25% divides by receipts excluding support (120), the wrong basis. 500% inverts the ratio (150/30).
Further reading: OECD Agricultural Policy Monitoring and Evaluation
In the AoA, market price support for a product is calculated as:
C. (Applied administered price − fixed external reference price) × eligible quantity
Annex 3 uses the 1986-88 fixed external reference price and eligible production. It is not budget spending, nor current world prices, which is why procurement can show large MPS when domestic prices are below world prices.
Further reading: WTO Agreement on Agriculture
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