WGU C211 GLOBAL ECONOMICS OBJECTIVE ASSESSMENT
ACTUAL 2026/2027 | Verified Answers | 100% Guarantee Pass
| Complete OA Exam Guide | A+ Graded
===================================================
============================= Section 1: Comparative
Advantage & International Trade Theory (Q1-12)
Q1. Country A can produce 100 units of wheat or 50 units of cloth with its full labor
force. Country B can produce 80 units of wheat or 80 units of cloth with its full labor
force. Based on opportunity cost, which country has the comparative advantage in
wheat production?
A. Country A, because it can produce more wheat in absolute terms
B. Country B, because it can produce more cloth in absolute terms
C. Country A, because its opportunity cost of wheat is 0.5 cloth versus 1.0 cloth for
Country B [CORRECT]
D. Country B, because its opportunity cost of wheat is lower than Country A's
Rationale: Country A's opportunity cost of 1 wheat = 0.5 cloth (50/100). Country B's
opportunity cost of 1 wheat = 1 cloth (80/80). Since 0.5 < 1, Country A has comparative
advantage in wheat.
Correct Answer: C
Q2. The production possibilities frontier (PPF) for two countries shows that without
trade, Country X consumes at point (200 computers, 300 textiles) and Country Y
consumes at point (150 computers, 100 textiles). After specializing according to
comparative advantage and trading at a rate of 1 computer = 1.5 textiles, Country X
trades 100 computers to Country Y. What is Country X's new consumption bundle?
A. (100 computers, 450 textiles)
B. (300 computers, 150 textiles)
C. (100 computers, 450 textiles) [CORRECT]
D. (200 computers, 300 textiles) with no gains from trade
,Rationale: Country X specializes in computers, produces 300, keeps 200 for itself after
trading 100, and receives 150 textiles (100 × 1.5). New consumption: 200 computers,
300 + 150 = 450 textiles.
Correct Answer: C
Q3. Which theory explains why a country might export goods that intensively use its
abundant factors of production and import goods that intensively use its scarce
factors?
A. Absolute advantage theory
B. Heckscher-Ohlin theory [CORRECT]
C. Product life cycle theory
D. New trade theory
Rationale: The Heckscher-Ohlin theory states that countries export goods that
intensively use their abundant factors (labor, capital, land) and import goods requiring
scarce factors.
Correct Answer: B
Q4. In the Heckscher-Ohlin model, if Country L is labor-abundant and Country K is
capital-abundant, which trade pattern is consistent with the theory?
A. Country L exports capital-intensive goods and Country K exports labor-intensive
goods
B. Country L exports labor-intensive goods and Country K exports capital-intensive
goods [CORRECT]
C. Both countries export identical goods due to factor price equalization
D. Country L exports both labor and capital-intensive goods
Rationale: The Heckscher-Ohlin model predicts that labor-abundant countries export
labor-intensive goods, while capital-abundant countries export capital-intensive goods.
Correct Answer: B
Q5. The Leontief paradox refers to which empirical finding?
A. Capital-abundant countries export labor-intensive goods and import capital-intensive
goods [CORRECT]
B. Labor-abundant countries export capital-intensive goods
C. Trade volumes are lower than predicted by comparative advantage models
D. Factor price equalization never occurs in practice
Rationale: The Leontief paradox found that U.S. exports were less capital-intensive than
U.S. imports, contradicting the Heckscher-Ohlin prediction that capital-abundant
America would export capital-intensive goods.
, Correct Answer: A
Q6. According to the product life cycle theory, in which stage does production typically
shift from the innovating country to developing countries?
A. Introduction stage
B. Growth stage
C. Maturity stage [CORRECT]
D. Decline stage
Rationale: In the maturity stage, the product becomes standardized, price competition
intensifies, and production shifts to lower-cost developing countries to maintain
profitability.
Correct Answer: C
Q7. New trade theory emphasizes which of the following as a key driver of international
trade?
A. Differences in factor endowments between countries
B. Economies of scale and first-mover advantages [CORRECT]
C. Government subsidies for declining industries
D. Differences in consumer preferences across borders
Rationale: New trade theory explains trade patterns through economies of scale,
network effects, and first-mover advantages, particularly in industries with high fixed
costs and increasing returns.
Correct Answer: B
Q8. A firm in the software industry achieves significant cost reductions as its global
user base expands. This phenomenon best illustrates which concept from new trade
theory?
A. Comparative advantage through labor abundance
B. Network effects and economies of scale [CORRECT]
C. Factor intensity reversal
D. Product standardization in the maturity stage
Rationale: Network effects occur when a product's value increases with the number of
users, creating economies of scale and first-mover advantages that drive trade patterns.
Correct Answer: B
Q9. Country M can produce 1 car using 10 hours of labor or 1 ton of rice using 2 hours
of labor. Country N can produce 1 car using 8 hours of labor or 1 ton of rice using 4
hours of labor. Which statement is correct?
ACTUAL 2026/2027 | Verified Answers | 100% Guarantee Pass
| Complete OA Exam Guide | A+ Graded
===================================================
============================= Section 1: Comparative
Advantage & International Trade Theory (Q1-12)
Q1. Country A can produce 100 units of wheat or 50 units of cloth with its full labor
force. Country B can produce 80 units of wheat or 80 units of cloth with its full labor
force. Based on opportunity cost, which country has the comparative advantage in
wheat production?
A. Country A, because it can produce more wheat in absolute terms
B. Country B, because it can produce more cloth in absolute terms
C. Country A, because its opportunity cost of wheat is 0.5 cloth versus 1.0 cloth for
Country B [CORRECT]
D. Country B, because its opportunity cost of wheat is lower than Country A's
Rationale: Country A's opportunity cost of 1 wheat = 0.5 cloth (50/100). Country B's
opportunity cost of 1 wheat = 1 cloth (80/80). Since 0.5 < 1, Country A has comparative
advantage in wheat.
Correct Answer: C
Q2. The production possibilities frontier (PPF) for two countries shows that without
trade, Country X consumes at point (200 computers, 300 textiles) and Country Y
consumes at point (150 computers, 100 textiles). After specializing according to
comparative advantage and trading at a rate of 1 computer = 1.5 textiles, Country X
trades 100 computers to Country Y. What is Country X's new consumption bundle?
A. (100 computers, 450 textiles)
B. (300 computers, 150 textiles)
C. (100 computers, 450 textiles) [CORRECT]
D. (200 computers, 300 textiles) with no gains from trade
,Rationale: Country X specializes in computers, produces 300, keeps 200 for itself after
trading 100, and receives 150 textiles (100 × 1.5). New consumption: 200 computers,
300 + 150 = 450 textiles.
Correct Answer: C
Q3. Which theory explains why a country might export goods that intensively use its
abundant factors of production and import goods that intensively use its scarce
factors?
A. Absolute advantage theory
B. Heckscher-Ohlin theory [CORRECT]
C. Product life cycle theory
D. New trade theory
Rationale: The Heckscher-Ohlin theory states that countries export goods that
intensively use their abundant factors (labor, capital, land) and import goods requiring
scarce factors.
Correct Answer: B
Q4. In the Heckscher-Ohlin model, if Country L is labor-abundant and Country K is
capital-abundant, which trade pattern is consistent with the theory?
A. Country L exports capital-intensive goods and Country K exports labor-intensive
goods
B. Country L exports labor-intensive goods and Country K exports capital-intensive
goods [CORRECT]
C. Both countries export identical goods due to factor price equalization
D. Country L exports both labor and capital-intensive goods
Rationale: The Heckscher-Ohlin model predicts that labor-abundant countries export
labor-intensive goods, while capital-abundant countries export capital-intensive goods.
Correct Answer: B
Q5. The Leontief paradox refers to which empirical finding?
A. Capital-abundant countries export labor-intensive goods and import capital-intensive
goods [CORRECT]
B. Labor-abundant countries export capital-intensive goods
C. Trade volumes are lower than predicted by comparative advantage models
D. Factor price equalization never occurs in practice
Rationale: The Leontief paradox found that U.S. exports were less capital-intensive than
U.S. imports, contradicting the Heckscher-Ohlin prediction that capital-abundant
America would export capital-intensive goods.
, Correct Answer: A
Q6. According to the product life cycle theory, in which stage does production typically
shift from the innovating country to developing countries?
A. Introduction stage
B. Growth stage
C. Maturity stage [CORRECT]
D. Decline stage
Rationale: In the maturity stage, the product becomes standardized, price competition
intensifies, and production shifts to lower-cost developing countries to maintain
profitability.
Correct Answer: C
Q7. New trade theory emphasizes which of the following as a key driver of international
trade?
A. Differences in factor endowments between countries
B. Economies of scale and first-mover advantages [CORRECT]
C. Government subsidies for declining industries
D. Differences in consumer preferences across borders
Rationale: New trade theory explains trade patterns through economies of scale,
network effects, and first-mover advantages, particularly in industries with high fixed
costs and increasing returns.
Correct Answer: B
Q8. A firm in the software industry achieves significant cost reductions as its global
user base expands. This phenomenon best illustrates which concept from new trade
theory?
A. Comparative advantage through labor abundance
B. Network effects and economies of scale [CORRECT]
C. Factor intensity reversal
D. Product standardization in the maturity stage
Rationale: Network effects occur when a product's value increases with the number of
users, creating economies of scale and first-mover advantages that drive trade patterns.
Correct Answer: B
Q9. Country M can produce 1 car using 10 hours of labor or 1 ton of rice using 2 hours
of labor. Country N can produce 1 car using 8 hours of labor or 1 ton of rice using 4
hours of labor. Which statement is correct?
