WorksheetsCheck your knowledge
Total questions: 10
Worksheet time: 75secs
According to the theory of comparative advantage, even if a nation has an absolute disadvantage in both commodities compared to another nation, what can still happen?
That nation cannot participate in international trade
That nation can still engage in mutually beneficial trade
That nation will become poorer
That nation can only be self-sufficient
In which of the following cases does comparative advantage not occur for either nation?
When one nation has an absolute advantage in both goods at the same ratio.
When one nation has an absolute advantage in both goods at different ratios.
When one nation has no absolute advantage in either good.
When both nations have an absolute advantage in one good each.
The H-O model’s assumptions includes new factors compared to David Ricardo’s trade theory
labor and technology
labor and capital
labor and transportation costs
labor and goods
Vietnam has a unique set of fators
relatively young labor force
abundant natural resources
strategic geographical location
all answer are correct
Suppose that the US and the Netherlands have the following unit labor requirements:
Which country has comparative advantage in bicycles?
The US
Netherlands
Both countries
Which of the following best describes the relationship between labor wages and comparative advantage?
Higher wages result in a comparative advantage in producing all goods.
Lower wages in one nation make its goods cheaper and enhance comparative advantage.
Wages have no impact on comparative advantage in international trade.
Only nations with equal wages can benefit from comparative advantage.
In Ricardo’s theory of comparative advantage, why can two nations benefit from trade even if one has an absolute disadvantage in producing both goods?
The nation with absolute disadvantage has lower wages.
The nation with absolute disadvantage has better technology.
The other nation has no access to international markets.
The labor productivity difference cancels out in international trade.
Comparative advantage in the Ricardian trade model theory is determined by its:
Differences in technology
The ratio of capital/labor (K/L)
Similarity in demand
The abundance of endowments
What is the title of David Ricardo’s most influential book, and what central economic concept does it introduce?
The Wealth of Nations – introduces the division of labor
Principles of Political Economy and Taxation – introduces comparative advantage
The General Theory of Employment, Interest, and Money – introduces demand-side economics
Capital: Critique of Political Economy – introduces the labor theory of value
Which of the following is a key assumption in David Ricardo’s model of comparative advantage used to explain the theory? (choose the best answer)
There are no transportation costs between countries
Labor as the measure of value
Two countries, two goods model
There is no technological change
