chapter 2 tmqt

Countries trade with each other because they are _______ and because of ______.

• different, costs

• similar, scale economies

• different, scale economies

• similar, costs

• None of the above

Trade between two countries can benefit both countries if

• each country exports that good in which it has a comparative advantage.

• Each country enjoys superior terms of trade.

• Each country has a more elastic demand for the imported goods.

• each country has a more elastic supply for the supplied goods.

• Both C and D.

The Ricardian theory of comparative advantage states that a country has a comparative advantage in widgets if

• output per worker of widgets is higher in that country

• that country's exchange rate is low.

• wage rates in that country are high.

• the output per worker of widgets as compared to the output of some other product is higher in that country.

• Both B and C.

In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ____unit labor requirements

• 1

• 2

• 3

• 4

• 5

A country engaging in trade according to the principles of comparative advantage gains from trade because it

• is producing exports indirectly more efficiently than it could alternatively.

• is producing imports indirectly more efficiently than it could domestically

• is producing exports using fewer labor units.

• is producing imports indirectly using fewer labor units.

• None of the above.

• Neither country has a comparative advantage.

• Home has a comparative advantage in cloth

• Foreign has a comparative advantage in cloth

• Home has a comparative advantage in widgets.

• Home has a comparative advantage in both products

If it is ascertained that Foreign uses prison-slave labor to produce its exports, then home should

• export cloth.

• export widgets.

• export both and import nothing.

• export and import nothing.

• All of the above.

If wages were to double in Home, then Home should:

• export cloth.

• export widgets.

• export both and import nothing.

• export and import nothing.

• All of the above.

If the world equilibrium price of widgets were 4 Cloths, then

• both countries could benefit from trade with each other.

• neither country could benefit from trade with each other.

• each country will want to export the good in which it enjoys comparative advantage.

• neither country will want to export the good in which it enjoys comparative advantage.

• both countries will want to specialize in cloth.

• Neither country has a comparative advantage.

• Home has a comparative advantage in cloth.

• Foreign has a comparative advantage in cloth.

• Foreign has a comparative advantage in widgets

• Home has a comparative advantage in both products.