Factor-Intensity Reversal explains the situation in which a commodity is the labor-intensive commodity in the labor-abundant country and the capital-intensive commodity in the capital- abundant country. All the other items are related to Specific Factors Model.

Production Possibility Frontier-PPF is a curve that shows the alternative combinations of the two commodities that an economy can produce by fully utilizing all of its resources.

Autarky: The situation in which a country does not trade with the rest of the world. Each nation must produce whatever its consumers want to consume. There is no other way to obtain goods.

Volume of trade gives the total amount of imports and exports. Imports are the goods or services that are bought from a foreign country while exports refer to the goods or services that are sold to a foreign country. Thus, balance of trade gives the difference between total imports and total exports. If total imports are more than the total exports within an economy, then there is a trade deficit. On the other hand, when total exports exceed total imports, it means that there is a trade surplus

The most referred demand oriented model of international trade is the Overlapping Demands Model. The Model was developed by the Swedish economist Staffan Linder in 1961 (I). According to Linder, much of the current international trade involves trade in manufactured commodities,and demand conditions constitute a big importance in explaining international trade patterns (II); the main determinant of the demand preferences of the domestic consumers is their income levels (III), and firms within a country produce commodities for the domestic market, and they are motivated to produce more (not less) when the market is enlarged (IV). The correct answer is C.

Barter: An exchange of a commodity for another. Therefore, the correct option is B.

New international trade theories,in other words post- Heckscher-Ohlin theories, do not reject the Heckscher-Ohlin Theory. They improve it as of complementary trade theories. The correct answer is " A ".

Theory of Absolute Advantage

It is the theory of Adam Smith who has been accepted as the father of the Classical Trade Theory. According to the Theory of Absolute Advantage, both of the trading countries can gain if each of them produces the commodity in which they are more efficient.

Collect revenue to the Treasury: Another traditional aim of trade restrictions is to collect revenue to the Treasury. An import tariff serves as a customs tax on each imported commodity, and this tax collected from the imports goes to the Treasury to be used for public expenditure.

Labor productivity: The quantity of a good that can be produced per unit of labor input. It is the reciprocal of the unit labour requirement.

KEY TERMS AND CONCEPTS OF INTERNATIONAL TRADE

International trade which constitutes one of the two main parts of international economics has its own key words and concepts. Although they are mostly well-known, it’d be useful to give their precise meanings so as to provide conformity and consistency throughout the chapters. (1) Volume of trade: Defining the key terms and concepts has to start with the term volume of trade. Volume of trade gives the total amount of imports and exports. Imports are the goods or services that are bought from a foreign country while exports refer to the goods or services that are sold to a foreign country. Thus, balance of trade gives the difference between total imports and total exports. If total imports are more than the total exports within an economy, then there is a trade deficit. On the other hand, when total exports exceed total imports, it means that there is a trade surplus.

Foreign exchange market: The national currency of a country is exchanged for the currency of another in the foreign exchange market. Doğru yanıt " E " dir.

Growth of subsidiaries  indicates that there will be new establishments that supply materials or inputs to the industry. The other advantages are: Hereditary skill: Special skills for production can be transferred from one generation to another and thus prolong for decades. Use of specialized machinery: Since there is large scale production within the industrial district, the demand for specialized machinery and for skilled labor would be high. Local market for skill: Industrial district is a stable and constant market for skilled labor. Thus, the firms can easily find and employ skilled labor. On the contrary, it might be hard for a firm that is out of the industrial district to find skilled labor. Introduction to new ideas: Firms that operate with the industrial district can pool their ideas and generate new common ideas on production.

Since countries use more than two factors of production, it is impossible to find out the relative factor prices that are the determinants of the factor endowments without using factor price index. We need to know the factor price index so as to determine factor endowments of the trading countries in the real world of many countries, many commodities and many factors of production.

Negative economies of scale exist when the cost of producing a unit of commodity increases as its output rate increases. Doğru yanıt " A " dır. 

Unemployment rate: It is the number of unemployed people expressed as a percentage of all the people who have jobs or are looking for one (Parkin, 2005, p. 467). The correct answer is " B ".

Terms of trade: Another key term which is used within the scope of international trade is terms of trade. Terms of trade of a nation are found by the ratio of the price index of its exports to the price index of its imports. Therefore, the correct option is E.

Devaluation: Lowering the value of the national currency by the decision of the Central Bank is called devaluation. Therefore, the correct option is C.

Foreign exchange market: The national currency of a country is exchanged for the currency of another in the foreign exchange market. Therefore, the correct option is D.

Industrial revolution → Production boom → New market searches → Widespread use of liberalism in free trade or trade → Mercantilism