MBA 680 EXAMS (1-3) QUESTIONS WELL ANSWERED LATEST UPDATE 2026
The following input-requirements data are for Country A, a capital-abundant country that produces
nothing but bread and wine using only capital and labor as inputs. Which of the following can most
reasonably be inferred for the short run after this country opens to free trade? - Answers The wage
rates and rental rates of capital will rise in the wine industry but will fall in the bread industry.
In the absence of trade, a country produces at a point where its production-possibility curve is
tangent to the highest possible community indifference curve. - Answers True
When factors of production move to better-paying sectors of the economy in the long run after the
opening of trade in the country, wages and rents will be bid back to their pre-trade levels. - Answers
False
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink),
and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant
and food is relatively land-intensive. According to the Heckscher-Ohlin theory, Alpha has a
comparative advantage in the production of - Answers Drink
Consider a two-country, two-commodity model. The table below shows the units of Good X and Good
Y produced in Country A and Country B per labor hour. Which of the following statements is true? -
Answers Country A has an absolute advantage in the production of Good X.
With a shift from no trade to free trade, if Country X is relatively labor-abundant and relatively land-
scarce and Country Y is relatively labor-scarce and relatively land-abundant, the factor-price
equalization theorem predicts that - Answers Wages will rise in Country X and fall in Country Y until
they equalize.
In the figure below, AB is the production-possibility curve of Canada. I1 and I2 are two of the
community indifferences curves of Canada. In the absence of trade Canada will: - Answers produce
and consume at point C0.
When factors of production move to better-paying sectors of the economy in the long run after the
opening of trade in the country, wages and rents will be bid back to their pre-trade levels. - Answers
False
When Wassily Leontief tested the predictions of the Heckscher-Ohlin theory, he found that in 1947
the United States was exporting relatively labor-intensive goods and importing relatively capital-
intensive goods. His findings - Answers contradicted the Heckscher-Ohlin theory, because the United
States was relatively capital-abundant.
The figure below shows the production-possibility curves for Canada (AB) and the rest of the world
(CD). The opportunity cost of producing one liter of maple syrup in Canada and in the rest of the
world are _____ bushels and _____ bushels of corn, respectively. - Answers 7/9; two
Consider a two-country, two-commodity model. The table below shows the units of Good X and Good
Y produced in Country A and Country B per labor hour. If Country A transfers one labor hour from the
production of Good Y to the production of Good X, total world production of Good X will _____ by
_____ unit(s). - Answers increase; one
Trade makes some people absolutely better off and others absolutely worse off in each of the trading
countries. However, the gainers and losers in the short run are somewhat different from those in the
long run, because more adjustment can occur in the long run. - Answers True
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink),
and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant
and drink is relatively labor-intensive. Which of the following is most likely to happen in the long run
following the opening of free trade between the countries? - Answers The workers in Alpha will be
better off but the landowners will be worse off.
The theory which predicts that trade occurs because of differences in the availability of factor inputs
across countries and the differences in the proportions in which the inputs are used in producing
different products is called - Answers the Heckscher-Ohlin theory.
Consider a two-country, two-commodity model. Each country has an increasing-cost production-
possibility curve. In this model the amounts of the goods that are produced in a country in the no-
trade situation are determined by: - Answers The relative prices of the goods.
Which of the following can be concluded from the relationships given below?
(U.K. capital stock) < (rest of the world's capital stock)
(U.K. labor supply) > (rest of the world's labor supply) - Answers The United Kingdom is relatively
labor-abundant compared to the rest of the world.
The following input-requirements data are for Country A, a capital-abundant country that produces
nothing but bread and wine using only capital and labor as inputs. Which of the following can most
reasonably be inferred for the short run after this country opens to free trade? - Answers The wage
rates and rental rates of capital will rise in the wine industry but will fall in the bread industry.
In the absence of trade, a country produces at a point where its production-possibility curve is
tangent to the highest possible community indifference curve. - Answers True
When factors of production move to better-paying sectors of the economy in the long run after the
opening of trade in the country, wages and rents will be bid back to their pre-trade levels. - Answers
False
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink),
and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant
and food is relatively land-intensive. According to the Heckscher-Ohlin theory, Alpha has a
comparative advantage in the production of - Answers Drink
Consider a two-country, two-commodity model. The table below shows the units of Good X and Good
Y produced in Country A and Country B per labor hour. Which of the following statements is true? -
Answers Country A has an absolute advantage in the production of Good X.
With a shift from no trade to free trade, if Country X is relatively labor-abundant and relatively land-
scarce and Country Y is relatively labor-scarce and relatively land-abundant, the factor-price
equalization theorem predicts that - Answers Wages will rise in Country X and fall in Country Y until
they equalize.
In the figure below, AB is the production-possibility curve of Canada. I1 and I2 are two of the
community indifferences curves of Canada. In the absence of trade Canada will: - Answers produce
and consume at point C0.
When factors of production move to better-paying sectors of the economy in the long run after the
opening of trade in the country, wages and rents will be bid back to their pre-trade levels. - Answers
False
When Wassily Leontief tested the predictions of the Heckscher-Ohlin theory, he found that in 1947
the United States was exporting relatively labor-intensive goods and importing relatively capital-
intensive goods. His findings - Answers contradicted the Heckscher-Ohlin theory, because the United
States was relatively capital-abundant.
The figure below shows the production-possibility curves for Canada (AB) and the rest of the world
(CD). The opportunity cost of producing one liter of maple syrup in Canada and in the rest of the
world are _____ bushels and _____ bushels of corn, respectively. - Answers 7/9; two
Consider a two-country, two-commodity model. The table below shows the units of Good X and Good
Y produced in Country A and Country B per labor hour. If Country A transfers one labor hour from the
production of Good Y to the production of Good X, total world production of Good X will _____ by
_____ unit(s). - Answers increase; one
Trade makes some people absolutely better off and others absolutely worse off in each of the trading
countries. However, the gainers and losers in the short run are somewhat different from those in the
long run, because more adjustment can occur in the long run. - Answers True
Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink),
and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant
and drink is relatively labor-intensive. Which of the following is most likely to happen in the long run
following the opening of free trade between the countries? - Answers The workers in Alpha will be
better off but the landowners will be worse off.
The theory which predicts that trade occurs because of differences in the availability of factor inputs
across countries and the differences in the proportions in which the inputs are used in producing
different products is called - Answers the Heckscher-Ohlin theory.
Consider a two-country, two-commodity model. Each country has an increasing-cost production-
possibility curve. In this model the amounts of the goods that are produced in a country in the no-
trade situation are determined by: - Answers The relative prices of the goods.
Which of the following can be concluded from the relationships given below?
(U.K. capital stock) < (rest of the world's capital stock)
(U.K. labor supply) > (rest of the world's labor supply) - Answers The United Kingdom is relatively
labor-abundant compared to the rest of the world.
