National Economics University

School of Trade and International Economics

-oOo-
International Economics

Version 01
Question 1 (4.0 points): Indicate whether statement below is True (T) or False (F) and
explaination – Circle T for True and F for False
The statement “ both nations use the different technology” is one of the assumptions of
T F 1 Heckscher- Ohlin theory on the comparative advantage
An import quota is a non-tariff trade barrier that imposes a limit on the quantity of
T F2
commodities that may be imported
If each worker in Vietnam can produce either 20 bushels of rice or 1 car per day, and
T F 3 each worker in Germany can produce either 30 bushels of rice or 4 cars per day, Vietnam
and Germany both can gain if Vietnam exports cars and Germany exports rice
T F 4 The country whose K/L ratio is the largest is defined to be the labor-abundant country
If each worker in Japan can produce either 40 bottles of wine or 40 yards of clothing per
T F 5hour and each worker in Australia can produce either 20 bottles of wine or 10 yards of
clothing per hour, Japan has a comparative advantage in wine production
The The statement “Labor can move freely between countries” is one of the theory
T F 6 assumptions on comparative advantage developed by D. Ricardo

Question 2 (3.0 points): Distinguish between the comparative advantage theory and
Hecksher-Ohlin theory, and give examples?
Question 3 (3.0 points): Assume that a world has only 2 countries (Country A and Country B)
and 2 commodities (X and Y) with the data provided in the table below.
Commodity Country A Country B
Commodity X (product/hour) 2 1
Commodity Y (product/hour) 3 3

1. Which commodity should be exported by which country? Explain your answer?

2. What is the range for mutually beneficial trade between two countries?
 National Economics University
School of Trade and International Economics
-oOo-
International Economics

Version 02
Question 1 (4.0 points): Indicate whether statement below is True (T) or False (F) and
explaination– Circle T for True and F for False
T F 1 An import quota is defined as a specific sum of money on certain imports
Graphically, total consumer surplus is represented by the area under the demand
T F2
curve and above the price, from the origin to the quantity purchased.
T F 3 A tax of 80 cents on imports of shirts would be an example of a specific tariff
A nation that gains from trade will find its consumption point being located inside its
T F 4 production possibilities curve

T F 5 Benefits of a tariff on an imported commodity usually accrue to domestic producers

Country M is a relatively scarce in capital and relatively abundant in labor nation,
T F and cars and coffee are considered as capital-intensive and labor-intensive,
6 respectively. The factor endowment theory states that Country M will import both
cars and coffee
Question 2 (3.0 points): Distinguish between the comparative advantage theory and
Hecksher-Ohlin theory, and give examples?
Question 3 (3.0 points): Assume that the functions of a demand curve and of a supply curve of a
small country V for commodity X are Dx = 130 – Px and Sx = -10 + Px respectively. The unit
price of commodity X imported from the rest of the world is 20 USD in the condition of the free
trade. Draw the graph and calculate the increase of the producer’s surplus, the decrease of the
consumer’s surplus if the country V would impose the import tariff at the rate of 25% on the
commodity X imported from the rest of the world?
 National Economics University
School of Trade and International Economics
-oOo-
International Economics

Version 03
Question 1 (4.0 points): Indicate whether statement below is True (T) or False (F) and
explaination – Circle T for True and F for False and explanation
An import quota is a non-tariff trade barrier that imposes a limit on the quantity of
T F 1
commodities that may be imported
T F 2 A tax of 10 percent on imports of T-shirts would be an example of an effective tariff
T F 3 An import quota is defined as a limit on the quantity of goods that may be imported
Japan is relatively scarce in labor and relatively abundant in capital, and shirts and
motorbikes are considered as labor-intensive and capital-intensive products
T F 4 respectively. According to the factor endowment theory Japan will import
motorbikes and export shirts
T F 5 The thought on comparative advantage is developed by A. Ricardo
If K/L in country 1 is greater than K/L in country 2, then country 2 is said to be labor
T F 6
abundant

Question 2 (3.0 points): Distinguish between the comparative advantage theory and
Hecksher-Ohlin theory, and give examples?
Question 3 (3.0 points): Assume that the functions of a demand curve and of a supply curve of a
small country V for commodity X are Dx = 110 – Px and Sx = -10 + Px respectively. The unit
price of commodity X imported from the rest of the world is 20 USD in the condition of the free
trade. Draw the graph and calculate the decrease of the consumer’s surplus and the government’s
revenue if the country V would impose the import tariff at the rate of 50% on the commodity X
imported from the rest of the world?
 National Economics University
School of Trade and International Economics
-oOo-
International Economics

Version 04
Question 1 (4.0 points): Indicate whether statement below is True (T) or False (F) and
explaination – Circle T for True and F for False
An import quota is a non-tariff trade barrier that imposes a limit on the quantity of
T F 1
commodities that may be imported
A nation that gains from trade will find its consumption point being located along its
T F 2 production possibilities curve

Unlike the mercantilists, Adam Smith maintained that free trade benefits all trading
T F 3
nations
The statement “Each nation has a fixed endowment of labor, and labor is fully
T F 4 employed and homogeneous” is one of the theory assumptions on comparative
advantage developed by D. Ricardo
T F 5 The thought on absolute advantage is developed by D. Smith
If K/L in country 1 is greater than K/L in country 2, then country 2 is said to be capital
F T 6
abundant
Question 2 (3.0 points): Distinguish between the comparative advantage theory and
Hecksher-Ohlin theory, and give examples?
Question 3 (3.0 points): Use the data in Table 1 to answer the following questions
Table 1. Output Possibilities for Country I and Country II
Country Output per worker per day
Commodity X Commodity Y
Country I 80 40
Country II 20 20
1. Indicate the good in which each country has a comparative advantage. Explain your
answer?
2. What is the range for mutually beneficial trade between two countries?