Trade makes firms behave more competitively, reducing their market power. Related posts. The theory of absolute advantage was put forward by Adam Smith who argued that different countries enjoyed absolute advantage in the production of some goods which formed the basis of … Assumptions Underlying the Theory of Absolute Advantage. Theory of Absolute Advantage; Theory of competitive Advantage; Porter’s diamond model; Paul krugman’s Theory; D. In Porter’s Diamond model which dimension talks about skill and knowledge upgradation of people working in the firm. An individual or business that can make a quality product at least as fast as someone else, and at a lower cost, can be said to have an absolute advantage. Economics MCQ is important for exams like CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other specialized department exam. Either click on a button or enter your answer in the box to the left of the question. Answer : b. … Answer. b. Which one of the following statements is the most appropriate answer ? Export DVDs C. Exports steel and DVDs D. There is no basis for gainful specialization and trade. d. Absolute advantage in clarinets. b) Absolute advantage in prodcution of computers Group A Economics Chapter International Trade MCQs: The Central Superior Services (denoted as CSS; or Bureaucracy) is an elite permanent bureaucratic authority, and the civil service that is responsible for running the civilian bureaucratic operations and government secretariats and directorates of … Another absolute vs comparative advantage example is a hypothetical example of two countries. Choose the most correct answer. The Theory of Absolute Advantage. Famous slogans – CSEET, GK December 11, 2020. Answer: (b) … A would export X to B *b. Current affairs CSEET – GK December 10, 2020. 8- According to the theory of Comparative Advantage, a country should produce and: a) Import goods in which it has an absolute advantage b) Import goods in which it has a comparative advantage c) Export goods in which it has an absolute advantage d) Export goods in which it has a comparative advantage 19- Last month Sandy could buy more goods in Japan with her American … Smith’s argument about absolute advantage was refined and developed by David Ricardo in 1817. Answer: (b) Adam Smith. Ans: a 7. Smith’s theory of absolute advantage predicts that the United States will produce only wheat (W) and the U.K. will produce only cloth (C). According to the Principle of absolute advantage Japan should ? a) Absolute cost advantage theory. Economics Multiple Choice Questions Test contains 10 questions. The Theory of Absolute Cost Advantage is given by (a) David Ricardo (b) Adam Smith (c) F W Taylor (d) Ohlin and Heckscher. Question 8 : Tourism industry in India is quite small compared to many other countries in terms of India’s potential and size. Clearly the physician has both absolute and comparative advantage in terms of performing surgery.However,alsosupposethephysicianisabet-ter organizer, typist and administrator than secre-tary. The mercantilist economic theory, which was widely followed between the 16 th and the 18 th century, came under a lot of criticism with the emergence of economists like John Locke and David Hume. Students and academicians of MBA, MMS, MCA, BBA, B. Com, BBA, PGDM and other management courses and specialisations can take benefit of these international business management multiple choice questions. Absolute advantage is the ability of an entity to produce a greater quantity of the same good or service with the same constraints than another entity. The concept of absolute advantage is generally attributed to Adam Smith for his 1776 publication The Wealth of Nations in which he countered mercantilist ideas. Product X b. Economics MCQ Questions and answers with easy and logical explanations. Country A can produce either 300 cars or 60 houses while country … This list of International business MCQ for NET Exam, PG and Ph D entrance exam preparation will also help students of other streams. Export steel B. Economics Mcqs. Mercantilism gained … e. None of the above. As you can see, each country has an absolute advantage over one product which helps them gain export revenue from other countries. While influential and insightful, the theory of absolute advantage is not always entirely accurate because many of these fundamental assumptions are in fact not true in practice. Hence the physician has an absolute advantage over the … Comparative Advantage and Trade: Sample Quiz. Whereas, Pakistan is producing around 26 million tonnes of wheat. Over time, Smith’s view came to be known as the absolute advantage theory of trade and was the dominant trade theory until David Ricardo, a 19th-century English economist, developed the theory of comparative advantage. Both countries benefit from the specialization of each of them in the production of the goods they have absolute advantage in. All firms can take advantage of cheap labor. Both nations would gain if they have unrestricted trade in wheat and cloth. Here are the most significant of these assumptions: 1. 1. According to the theory of comparative advantage, countries gain from trade because a. b) Comparative cost advantage theory. c) Opportunity cost theory. Question 18. About This Quiz & Worksheet. Answer. Learn More in these related Britannica articles: Adam Smith. b. Smith essentially suggested that a nation with an absolute advantage with a particular product could use the profits from trade to purchase items that other countries could produce more efficiently. Adam Smith, Scottish social philosopher and political economist. Ricardo, improving upon Adam Smith’s exposition, developed the theory of international trade based on what is known as the Principle of Comparative Advantage (Cost). Let us make in-depth study of the theory of absolute advantage. Example 2. Country A and country B. Thirdly, Porter’s national competitive advantage theory is based on empirical findings covering 10 countries and four industries. According to the Principle of absolute advantage Japan should ? He discussed the idea in his book An Inquiry into the Nature and Causes of the Wealth of Nations. Mcq Added by: Adden wafa. Business Multiple Choice Questions and Answers. Theory of Comparative advantage demonstrates that mutually advantageous trade cannot occur when one trading partner has an absolute advantage. Adam Smith is a grandfather of economics because he introduced two important concepts that many of the new trade theories are based on these two main concepts, which are specialization and free exchange. A majority of the countries in the sample have different economic backgrounds and do not necessarily support the finding. _____ shows the overall output generated at a given level of input: Smith provided the first concept of a nation’s wealth. Answers to Economics Multiple Choice Questions are available at the end of the last question. Economics Mcqs for test Preparation from Basic to Advance. A nation or company is said to have an absolute advantage if it requires fewer resources—generally raw materials, manpower, or time—to produce a … d) Factor-endowment theory. Select one: a. Monopolistic advantage b. Chapter 10 Multiple choice questions. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Fourthly, availability of natural resources, according to Porter, is not the only condition for attaining competitive advantage and there … B would import Y from A c. Neither country would want to trade If countries were to trade along the lines of comparative advantage: a. Country B has an absolute advantage in *a. Adam Smith’s Theory of Absolute Advantage . The theory of 'absolute advantage': Best describes a situation where there are two countries, A and B, and potentially two goods which can be traded, X and Y. The theory of absolute advantage holds that there are advantages to trade because different countries can produce different goods more efficiently than others. Absolute advantage theory was first presented by Adam Smith in his book “The Wealth of Nations” in 1776. Economics Multiple Choice Questions, which are covered in this chapter, relate to the topic, Theory of Production. When you have answered them all, click the Check-My-Answers button and you will see how well you know this material. [1] Comparative advantage is … This theory became known as the absolute advantage theory, because it was based on the absolute advantage: a country exports the goods, which costs of production are lower than in a partner country, and imports the goods, produced abroad with lower costs. Home ; Translate; Business MCQ Multinational Business Chapter 5 True & False The comparative advantage theory holds that a country will gain from trade even though it can produce all goods more efficiently than other countries. Subsidiaries consider the regional environment for policy / Strategy formulation is known as (a) Polycentric Approach (b) Regiocentric Approach (c) Ethnocentric Approach (d) Geocentric Approach. Firm strategy, structure and rivalry ; factor Conditions; Demand Conditions; Chance Variable; E. Find the odd man out. Difference Between Absolute Advantage vs Comparative Advantage. A. Business MCQ Multinational Business Chapter 5 True & False The theory of absolute advantage holds that there are advantages to trade because different countries can produce different goods more efficiently than others. Answer: False EXPLANATION-- The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. c. Absolute advantage in sleds. A is absolutely better at producing X and B is absolutely better at producing Y, and so if A specializes in producing X and B in Y, and they trade together, then both countries will gain. Comparative advantage in clarinets. Mercantilism advocated a national economic policy designed to maximize the nation’s trade and its gold and money reserves. a secretary. Factor proportions c. Internalization d. Absolute advantage Absolute Advantage . Absolute Cost Advantage Theory of International trade to remove drawbacks and to increase trade between countries. Below is the information about Adam Smiths International Trade Theory, it’s evolution and practibality. Adam Smith, the Scottish economist observed some drawbacks of existing Mercantilism Theory of International trade and he proposed a new theory i.e. Abbreviations CSEET December 11, 2020. The absolute advantage theory was created by Adam Smith in 1776. Origin of the theory. The theory of absolute advantage was put forward by Adam Smith who argued that different countries enjoyed absolute advantage in the production of some goods which formed the basis of trade between the countries. 1. 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