Question 1

Which one of the following is NOT an assumption contained in the Classical/Ricardo trade model?

Accepted Answer

A)  Factors of production (labor) are completely mobile within a country. 
B)  Factors of production (labor) are completely mobile between countries. 
C)  Marginal costs are constant as production increases for a firm/industry. 
D)  Transportation costs of goods between countries are zero. 
A)  Factors of production (labor) are completely mobile within a country. 
B)  Factors of production (labor) are completely mobile between countries. 
C)  Marginal costs are constant as production increases for a firm/industry. 
D)  Transportation costs of goods between countries are zero.

Question 2

Given the following Ricardo-type table showing the amount of labor input required to produce one unit of output of each of the two goods in each of the two countries:
$\begin{array}{lll}
&\underline{\text { Wheat }}&\underline{\text { Clothing }}\
\text { United Kingdom } & 6 \text { days } & 5 \text { days } \
\text { United States } & 4 \text { days } & 3 \text { days }
\end{array}$

Accepted Answer

A)  The United Kingdom has an absolute advantage in neither good. 
B)  The United States has a comparative advantage in wheat. 
C)  The United States has a comparative advantage in both goods. 
D)  A post-trade price ratio (terms of trade) of 1 wheat:1.5 clothing is a feasible
Equilibrium post-trade price ratio. 
A)  The United Kingdom has an absolute advantage in neither good. 
B)  The United States has a comparative advantage in wheat. 
C)  The United States has a comparative advantage in both goods. 
D)  A post-trade price ratio (terms of trade) of 1 wheat:1.5 clothing is a feasible
Equilibrium post-trade price ratio.

Question 3

Suppose that, with constant opportunity costs, Spain can produce 2,000 units of clothing if it devotes all of its resources to clothing production and 8,000 units of wheat if it devotes all of its resources to wheat production. If Spain is opened to trade at a world price ratio of 1 wheat:0.4 clothing (or 1 clothing:2.5 wheat), Spain will export __________; if the world price ratio were 1 wheat:4 clothing (or 1 clothing:2.5 wheat), Spain would __________.

Accepted Answer

A)  wheat; also export wheat 
B)  wheat; would export clothing 
C)  clothing; also would export clothing 
D)  clothing; would be indifferent to trade 
A)  wheat; also export wheat 
B)  wheat; would export clothing 
C)  clothing; also would export clothing 
D)  clothing; would be indifferent to trade

Question 4

Did the concept of comparative advantage strengthen or worsen the case against Mercantilist trade doctrine? Why?

Accepted Answer

The concept of comparative advantage str

Question 5

Why did Ricardo think that international trade was based on comparative advantage while internal (domestic) trade was based on absolute advantage?

Accepted Answer

Ricardo believed that international trad

Question 6

Given the following Ricardo-type table showing the amount of labor input needed to get one unit of output in each industry in each country:
$$\begin{array} { l c l } 
&\underline{ \text { Wheat }} &\underline{ \text { Chairs} } \
\text { Malaysia } & 3 \text { days } & 2 \text { days } \
\text { India } & \text { 10 days } & 8 \text { days }
\end{array}$$

Accepted Answer

A)  Terms of trade of 1 wheat:1.25 chairs is not a feasible equilibrium terms of trade. 
B)  Terms of trade of 1 wheat:1.5 chairs would give all the gains from trade to India. 
C)  Malaysia has an absolute advantage in both goods and a comparative advantage in Wheat. 
D)  India has an absolute advantage in both goods and a comparative advantage in wheat. 
A)  Terms of trade of 1 wheat:1.25 chairs is not a feasible equilibrium terms of trade. 
B)  Terms of trade of 1 wheat:1.5 chairs would give all the gains from trade to India. 
C)  Malaysia has an absolute advantage in both goods and a comparative advantage in Wheat. 
D)  India has an absolute advantage in both goods and a comparative advantage in wheat.

Question 7

It is often said that international trade involves both absolute and comparative advantage. Can this be so? Why or why not?

Accepted Answer

Yes, it can be said that international t

Question 8

In the following Classical-type table showing the output per 10-days of labor input in each of the two commodities in each of the two countries,
$$\begin{array} { l l l } 
&\underline{ \text { Cameras }} &\underline{ \text { Wine }} \
\text { France } & 100 \text { units } & 40 \text { units } \
\text { Germany } & 150 \text { units } & 50 \text { units }
\end{array}$$

Accepted Answer

A)  Germany has a comparative advantage in both goods. 
B)  France has an absolute advantage in both goods. 
C)  France has a comparative advantage in cameras. 
D)  the pretrade price ratio in France is 1 wine = 2.5 cameras. 
A)  Germany has a comparative advantage in both goods. 
B)  France has an absolute advantage in both goods. 
C)  France has a comparative advantage in cameras. 
D)  the pretrade price ratio in France is 1 wine = 2.5 cameras.

Which one of the following is NOT an assumption contained in the Classical/Ricardo trade model?

Given the following Ricardo-type table showing the amount of labor input required to produce one unit of output of each of the two goods in each of the two countries: United Kingdom 6 days 5 days United States 4 days 3 days

Did the concept of comparative advantage strengthen or worsen the case against Mercantilist trade doctrine? Why?

Why did Ricardo think that international trade was based on comparative advantage while internal (domestic) trade was based on absolute advantage?

Given the following Ricardo-type table showing the amount of labor input needed to get one unit of output in each industry in each country: Malaysia 3 days 2 days India 10 days 8 days

It is often said that international trade involves both absolute and comparative advantage. Can this be so? Why or why not?

In the following Classical-type table showing the output per 10-days of labor input in each of the two commodities in each of the two countries, France 100 units 40 units Germany 150 units 50 units

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

International Trade and the Developing Countries

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Prices and Output in the Open Economy: Aggregate Supply and Demand

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

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Exam 3: The Classical World of David Ricardo and Comparative Advantage

Which one of the following is NOT an assumption contained in the Classical/Ricardo trade model?

Given the following Ricardo-type table showing the amount of labor input required to produce one unit of output of each of the two goods in each of the two countries: United Kingdom 6 days 5 days United States 4 days 3 days

Did the concept of comparative advantage strengthen or worsen the case against Mercantilist trade doctrine? Why?

Why did Ricardo think that international trade was based on comparative advantage while internal (domestic) trade was based on absolute advantage?

Given the following Ricardo-type table showing the amount of labor input needed to get one unit of output in each industry in each country: Malaysia 3 days 2 days India 10 days 8 days

It is often said that international trade involves both absolute and comparative advantage. Can this be so? Why or why not?

In the following Classical-type table showing the output per 10-days of labor input in each of the two commodities in each of the two countries, France 100 units 40 units Germany 150 units 50 units

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

International Trade and the Developing Countries

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Prices and Output in the Open Economy: Aggregate Supply and Demand

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters