UGC-NET International Agri Trade & Export Management: practice questions

Question 1 · medium

Under constant opportunity costs, opening to free trade typically leads to:

1. No change in the production mix
2. Specialisation in the good with the higher opportunity cost of production
3. Incomplete specialisation in both goods
4. Complete specialisation in the good of comparative advantage

Question 2 · medium

The Stolper-Samuelson theorem states that an increase in the relative price of a good:

1. Raises the real return of the factor it uses intensively and lowers that of the other factor
2. Raises real returns to all factors in proportion
3. Raises the output of the good intensive in the more abundant factor, holding goods prices constant
4. Equalises factor prices across trading countries

Question 3 · hard

At constant commodity prices, an irrigation scheme that raises a country's effective supply of farmland will, according to the Rybczynski theorem:

1. Raise the rental rate of land
2. Leave outputs unchanged but lower wages and raise the rental rate of land
3. Increase output of the land-intensive good and reduce output of the other good
4. Increase output of both goods proportionally, since more land helps both sectors

Question 4 · hard

A good is labour-intensive in country A but capital-intensive in country B because factor prices differ greatly and substitution is easy. This phenomenon, offered as one explanation of the Leontief paradox, is called:

1. Factor-intensity reversal
2. Trade diversion
3. Immiserising growth
4. Demand reversal

Question 5 · medium

Staffan Linder's overlapping demand hypothesis predicts that trade in manufactures is most intense between countries with:

1. Large differences in labour productivity
2. Similar per-capita incomes
3. Very different factor endowments
4. Shared borders and a common language

Question 6 · medium

The Marshall-Lerner condition states that, from balanced trade, a devaluation improves the trade balance if:

1. Export supply is perfectly inelastic
2. The sum of the absolute price elasticities of demand for exports and imports is less than one
3. Each elasticity separately exceeds one, whatever the value of the other
4. The sum of the absolute price elasticities of demand for exports and imports exceeds one

Question 7 · hard

The 'impossible trinity' states that a country cannot simultaneously maintain:

1. Tariff protection, export subsidies and WTO membership
2. Low inflation, full employment and a trade surplus
3. Current-account and capital-account convertibility together with a floating exchange rate
4. A fixed exchange rate, free capital mobility and an independent monetary policy

Question 8 · hard

In a small importing country (Qd = 1000 − 2P, Qs = −200 + 2P, world price 200, tariff 50), the net national welfare loss (deadweight loss) from the tariff is:

1. 2,500
2. 5,000
3. 27,500
4. 10,000

Question 9 · hard

Flour carries a 30% tariff, wheat a 10% tariff, and wheat accounts for 60% of the value of flour at world prices. The effective rate of protection for flour milling is:

1. 30%
2. 60%
3. 20%
4. −20%

Question 10 · medium

According to Viner, a customs union reduces a member's welfare when it causes:

1. Lower prices for consumers
2. Trade diversion from a low-cost non-member to a higher-cost member
3. Trade creation replacing domestic production with cheaper partner imports
4. Economies of scale in the union