Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

When a nation achieves autarky equilibrium:

According to Ricardo, a country will have a comparative advantage in the product in which its:

According to the price-specie-flow-doctrine, a trade-surplus nation would experience gold outflows, a decrease in its money supply, and a fall in its price level.

If Canada experiences $\underline { \text { constant } }$ opportunity costs, its supply schedule of steel will be:

If a country's terms of trade improve, it must exchange more exports for a given amount of imports.

Assuming increasing cost conditions, trade between two countries would not be likely if they have:

Assume 1990 to be the base year. If by the end of 2004 a country's export price index rose from 100 to 140 while its import price index rose from 100 to 160, its terms of trade would equal 120.

The writings of G. MacDougall emphasized which of the following as an explanation of a country's competitive position?

If Japan loses competitiveness in computers, Japanese computer workers lose jobs to foreign computer workers and the wages of Japanese computer workers tend to fall relative to the wages of foreign computer workers.

Given a two-country and two-product world, the United States would enjoy all the attainable gains from free trade with Canada if it:

The theory of reciprocal demand best applies when two countries are of equal economic size, so that the demand conditions of each nation have a noticeable impact on market prices.

The mercantilists contended that because one nation's gains from trade come the expense of its trading partners, not all nations could simultaneously realize gains from trade.

Although J. S. Mill recognized that the region of mutually beneficial trade is bounded by the cost ratios of two countries, it was not until David Ricardo developed the theory of reciprocal demand that the equilibrium terms of trade could be determined.

The theory of reciprocal demand does $\underline { \text { not } }$ well apply when one country:

In the absence of trade, a nation is in equilibrium where a community indifference curve:

A fall in the price of imports or a rise in the price of exports will:

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

When nations are of similar size, and have similar taste patterns, the gains from trade

According to J. S. Mill, if we know the domestic demand expressed by both trading partners for both products, the equilibrium terms of trade can be defined.

The trade theories of Adam Smith and David Ricardo viewed the determination of competitiveness from the demand side of the market.