ECS3703 Assignment 2 2025 – Accurate Questions and
Verified Correct Solutions with Rationale
|| 100% Guaranteed Pass
<Latest Version>
ECS3703: International Economics - Core Concept Mastery Guide
This guide covers key areas: International Trade Theory, Trade Policy, Balance of
Payments, Exchange Rates, and Open-Economy Macroeconomics.
Part 1: The Ricardian and Heckscher-Ohlin Models
1. The Ricardian Model of trade is based on differences in what between
countries?
a) Factor Endowments
b) Technology (Labor Productivity)
c) Tastes and Preferences
d) Economies of Scale
Rationale: The Ricardian model explains trade through comparative advantage
arising from differences in labor productivity (technology).
,2. In the Ricardian model, a country will export the good in which it has a:
a) Absolute Advantage
b) Comparative Advantage
c) Monopoly Advantage
d) Large Domestic Market
Rationale: Trade patterns are determined by comparative advantage (lower
opportunity cost), not necessarily absolute advantage.
3. "Gains from trade" in the Ricardian model refer to:
a) Increased wages for all workers globally.
b) The ability of a country to consume beyond its Production Possibility
Frontier (PPF).
c) A country always running a trade surplus.
d) The elimination of all domestic unemployment.
Rationale: The core benefit of trade is that it allows consumption bundles that were
unattainable under autarky.
4. The Heckscher-Ohlin (H-O) model explains trade patterns based on:
a) Differences in technology.
b) Differences in factor endowments (e.g., capital and labor).
c) Product differentiation.
, d) Imperfect competition.
Rationale: The H-O model assumes identical technologies but different relative
amounts of factors like capital and labor.
5. According to the Heckscher-Ohlin theorem, a capital-abundant country will
export:
a) Labor-intensive goods.
b) Capital-intensive goods.
c) Goods it has an absolute advantage in.
d) Agricultural products.
Rationale: A country will export the good that intensively uses its abundant factor.
6. The Stolper-Samuelson theorem states that:
a) Trade will equalize factor prices between countries.
b) An increase in the price of a good increases the real return to the factor used
intensively in its production.
c) Economic growth will always be immiserizing.
d) Tariffs can improve a large country's terms of trade.
Rationale: It describes the income distribution effects of trade, linking goods
prices to factor returns.
Verified Correct Solutions with Rationale
|| 100% Guaranteed Pass
<Latest Version>
ECS3703: International Economics - Core Concept Mastery Guide
This guide covers key areas: International Trade Theory, Trade Policy, Balance of
Payments, Exchange Rates, and Open-Economy Macroeconomics.
Part 1: The Ricardian and Heckscher-Ohlin Models
1. The Ricardian Model of trade is based on differences in what between
countries?
a) Factor Endowments
b) Technology (Labor Productivity)
c) Tastes and Preferences
d) Economies of Scale
Rationale: The Ricardian model explains trade through comparative advantage
arising from differences in labor productivity (technology).
,2. In the Ricardian model, a country will export the good in which it has a:
a) Absolute Advantage
b) Comparative Advantage
c) Monopoly Advantage
d) Large Domestic Market
Rationale: Trade patterns are determined by comparative advantage (lower
opportunity cost), not necessarily absolute advantage.
3. "Gains from trade" in the Ricardian model refer to:
a) Increased wages for all workers globally.
b) The ability of a country to consume beyond its Production Possibility
Frontier (PPF).
c) A country always running a trade surplus.
d) The elimination of all domestic unemployment.
Rationale: The core benefit of trade is that it allows consumption bundles that were
unattainable under autarky.
4. The Heckscher-Ohlin (H-O) model explains trade patterns based on:
a) Differences in technology.
b) Differences in factor endowments (e.g., capital and labor).
c) Product differentiation.
, d) Imperfect competition.
Rationale: The H-O model assumes identical technologies but different relative
amounts of factors like capital and labor.
5. According to the Heckscher-Ohlin theorem, a capital-abundant country will
export:
a) Labor-intensive goods.
b) Capital-intensive goods.
c) Goods it has an absolute advantage in.
d) Agricultural products.
Rationale: A country will export the good that intensively uses its abundant factor.
6. The Stolper-Samuelson theorem states that:
a) Trade will equalize factor prices between countries.
b) An increase in the price of a good increases the real return to the factor used
intensively in its production.
c) Economic growth will always be immiserizing.
d) Tariffs can improve a large country's terms of trade.
Rationale: It describes the income distribution effects of trade, linking goods
prices to factor returns.
