Exam 2: The Law of Comparative Advantage

A difference in relative commodity prices between two nations can be based upon a difference in:

What proportion of international trade is based on absolute advantage?

The theory of comparative advantage was first proposed by

How can the production possibilities frontier be used to determine opportunity cost?

The first empirical test of the comparative advantage trade model was conducted by

Assume a Ricardian,constant-cost world.There are two countries,the United States and Canada.Each country can produce cameras and milk.The table below shows production per man-hour for each country. United States Carada Carneras 6 2 Milk 1 2 The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers. a)Use this information to graph production possibilities frontiers for both countries.Put cameras on the horizontal axis. b)Assuming that a world price is established at which both countries can gain from trade,show possible consumption frontiers for each country.

The Ricardian trade model has been empirically

If nation A can produce 5 units of good X or 10 units of good Y and nation B can produce 4 units of good X or 12 units of good Y we can conclude that nation A has a

If in a two-nation (A and B),two-commodity (X and Y)world,it is established that nation A has a comparative advantage in commodity X,then nation B must have: