Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

If two nations of approximately the same size and with similar taste patterns participate in international trade,the gains from trade tend to be shared about equally between them.

Ricardo's theory of comparative advantage was of limited real-world validity because it was founded on the:

Figure 2.1.Production Possibilities Schedule -Referring to Figure 2.1,the relative cost of aluminum in terms of steel is:

Figure 2.4 Production Possibilities Frontier -In Figure 2.4 one car can be produced at a cost of

Increasing opportunity costs suggest that:

When a nation is in autarky and maximizes its living standard,its consumption and production points are:

As a result of international trade,specialization in production tends to be:

The commodity terms of trade measures

The trading-triangle concept is used to indicate a nation's:

Table 2.1.Output Possibilities of the U.S.and the U.K. -Referring to Table 2.1,the United Kingdom gains most from trade if:

According to the principle of comparative advantage,an open trading system results in resources being channeled from uses of low productivity to those of high productivity.

Assume 1990 to be the base year.If by the end of 2004 a country's export price index rose from 100 to 125 while its import price index rose from 100 to 125,its terms of trade would equal 100.

Ricardo's model of comparative advantage assumed all of the following except:

The commodity terms of trade are found by dividing a country's import price index by its export price index.

The mercantilists would have objected to:

Figure 2.4 Production Possibilities Frontier -In Figure 2.4 the marginal rate of transformation of wheat into autos is

Table 2.3.Terms of Trade -Referring to Table 2.3,which country's terms of trade did not change between 1990 and 2004?

The United States benefits from outsourcing in all of the following ways except

If Canada experiences constant opportunity costs,its supply schedule of steel will be:

All of the following are sources of dynamic gains from trade except