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WGU C211 OA Global Economics
Exam 2025/2026 – Full Set of Exam
Questions and Verified Correct
Answers | 100% Guarantee Pass with
Updated Study Content
Trade Theory
1. Which trade theory suggests that countries specialize in goods they can produce
most efficiently due to resource endowments?
A. Mercantilism
B. Absolute Advantage
C. Comparative Advantage
D. Heckscher-Ohlin Theory
Correct Answer: D. Heckscher-Ohlin Theory
Explanation: The Heckscher-Ohlin Theory posits that countries export goods that use
their abundant factors of production (e.g., labor, capital) and import goods that use scarce
factors. This explains specialization based on resource endowments, unlike mercantilism
(trade surplus focus), absolute advantage (efficiency in one good), or comparative
advantage (relative efficiency).
2. According to the theory of comparative advantage, a country should:
A. Export goods it produces less efficiently
B. Import goods it can produce at lower opportunity cost
C. Export goods it can produce at lower opportunity cost
D. Avoid trade to protect domestic industries
Correct Answer: C. Export goods it can produce at lower opportunity cost
Explanation: Comparative advantage, developed by David Ricardo, suggests that
countries should specialize in goods with the lowest opportunity cost and export them,
even if they lack absolute advantage. This maximizes global efficiency and trade benefits,
unlike protectionism or importing low-opportunity-cost goods.
3. What does the Leontief Paradox suggest about the Heckscher-Ohlin Theory?
A. It confirms the theory’s predictions
B. It shows that capital-abundant countries export labor-intensive goods
C. It supports mercantilist policies
D. It emphasizes absolute advantage over comparative advantage
Correct Answer: B. It shows that capital-abundant countries export labor-intensive
goods
, 2
Explanation: The Leontief Paradox found that the U.S., a capital-abundant country,
exported labor-intensive goods and imported capital-intensive goods, contradicting the
Heckscher-Ohlin Theory’s prediction that countries export goods using abundant factors.
This challenges the theory’s assumptions about factor intensity.
4. Which trade theory explains why countries with similar economies trade similar
goods?
A. Mercantilism
B. New Trade Theory
C. Absolute Advantage
D. Comparative Advantage
Correct Answer: B. New Trade Theory
Explanation: New Trade Theory, developed by Paul Krugman, explains intra-industry
trade (e.g., cars between Germany and Japan) through economies of scale and product
differentiation, not factor endowments. This applies to countries with similar economies,
unlike mercantilism or traditional advantage theories.
5. A country imposes tariffs to protect domestic industries. This aligns with which
trade theory?
A. Comparative Advantage
B. Heckscher-Ohlin Theory
C. Mercantilism
D. New Trade Theory
Correct Answer: C. Mercantilism
Explanation: Mercantilism advocates for protectionist measures like tariffs to maximize
exports and minimize imports, ensuring a trade surplus. This contrasts with comparative
advantage and Heckscher-Ohlin, which promote free trade, and New Trade Theory,
which focuses on economies of scale.
6. What is a key assumption of the Ricardian model of comparative advantage?
A. Perfect factor mobility
B. Constant returns to scale
C. Multiple factors of production
D. Identical consumer preferences globally
Correct Answer: B. Constant returns to scale
Explanation: The Ricardian model assumes constant returns to scale, meaning
production efficiency does not change with output levels. It focuses on labor as the sole
factor, assumes immobile factors between countries, and does not require identical
consumer preferences.
7. How does the Stolper-Samuelson theorem relate to trade?
A. It predicts trade barriers increase economic growth
B. It explains how trade benefits owners of abundant factors
C. It supports absolute advantage over comparative advantage
D. It suggests trade reduces income inequality
Correct Answer: B. It explains how trade benefits owners of abundant factors
Explanation: The Stolper-Samuelson theorem, part of the Heckscher-Ohlin model, states
that trade benefits owners of a country’s abundant factors (e.g., labor in labor-rich
countries) while harming owners of scarce factors, affecting income distribution.
WGU C211 OA Global Economics
Exam 2025/2026 – Full Set of Exam
Questions and Verified Correct
Answers | 100% Guarantee Pass with
Updated Study Content
Trade Theory
1. Which trade theory suggests that countries specialize in goods they can produce
most efficiently due to resource endowments?
A. Mercantilism
B. Absolute Advantage
C. Comparative Advantage
D. Heckscher-Ohlin Theory
Correct Answer: D. Heckscher-Ohlin Theory
Explanation: The Heckscher-Ohlin Theory posits that countries export goods that use
their abundant factors of production (e.g., labor, capital) and import goods that use scarce
factors. This explains specialization based on resource endowments, unlike mercantilism
(trade surplus focus), absolute advantage (efficiency in one good), or comparative
advantage (relative efficiency).
2. According to the theory of comparative advantage, a country should:
A. Export goods it produces less efficiently
B. Import goods it can produce at lower opportunity cost
C. Export goods it can produce at lower opportunity cost
D. Avoid trade to protect domestic industries
Correct Answer: C. Export goods it can produce at lower opportunity cost
Explanation: Comparative advantage, developed by David Ricardo, suggests that
countries should specialize in goods with the lowest opportunity cost and export them,
even if they lack absolute advantage. This maximizes global efficiency and trade benefits,
unlike protectionism or importing low-opportunity-cost goods.
3. What does the Leontief Paradox suggest about the Heckscher-Ohlin Theory?
A. It confirms the theory’s predictions
B. It shows that capital-abundant countries export labor-intensive goods
C. It supports mercantilist policies
D. It emphasizes absolute advantage over comparative advantage
Correct Answer: B. It shows that capital-abundant countries export labor-intensive
goods
, 2
Explanation: The Leontief Paradox found that the U.S., a capital-abundant country,
exported labor-intensive goods and imported capital-intensive goods, contradicting the
Heckscher-Ohlin Theory’s prediction that countries export goods using abundant factors.
This challenges the theory’s assumptions about factor intensity.
4. Which trade theory explains why countries with similar economies trade similar
goods?
A. Mercantilism
B. New Trade Theory
C. Absolute Advantage
D. Comparative Advantage
Correct Answer: B. New Trade Theory
Explanation: New Trade Theory, developed by Paul Krugman, explains intra-industry
trade (e.g., cars between Germany and Japan) through economies of scale and product
differentiation, not factor endowments. This applies to countries with similar economies,
unlike mercantilism or traditional advantage theories.
5. A country imposes tariffs to protect domestic industries. This aligns with which
trade theory?
A. Comparative Advantage
B. Heckscher-Ohlin Theory
C. Mercantilism
D. New Trade Theory
Correct Answer: C. Mercantilism
Explanation: Mercantilism advocates for protectionist measures like tariffs to maximize
exports and minimize imports, ensuring a trade surplus. This contrasts with comparative
advantage and Heckscher-Ohlin, which promote free trade, and New Trade Theory,
which focuses on economies of scale.
6. What is a key assumption of the Ricardian model of comparative advantage?
A. Perfect factor mobility
B. Constant returns to scale
C. Multiple factors of production
D. Identical consumer preferences globally
Correct Answer: B. Constant returns to scale
Explanation: The Ricardian model assumes constant returns to scale, meaning
production efficiency does not change with output levels. It focuses on labor as the sole
factor, assumes immobile factors between countries, and does not require identical
consumer preferences.
7. How does the Stolper-Samuelson theorem relate to trade?
A. It predicts trade barriers increase economic growth
B. It explains how trade benefits owners of abundant factors
C. It supports absolute advantage over comparative advantage
D. It suggests trade reduces income inequality
Correct Answer: B. It explains how trade benefits owners of abundant factors
Explanation: The Stolper-Samuelson theorem, part of the Heckscher-Ohlin model, states
that trade benefits owners of a country’s abundant factors (e.g., labor in labor-rich
countries) while harming owners of scarce factors, affecting income distribution.
