Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

Table 2.2.Output possibilities for South Korea and Japan -Refer to Table 2.2.According to the principle of comparative advantage:

According to the principle of absolute advantage,international trade is beneficial to the world if one nation has an absolute cost advantage in the production of one good while the other nation has an absolute cost advantage in the other good.

Referring to Table 2.1,the United Kingdom has a comparative advantage in the production of:

The theory of reciprocal demand does not well apply when one country:

The mercantilists would have objected to:

According to the mercantilists,a nation's welfare would improve if it maintained a surplus of exports over imports.

Assume that the United States is more efficient than the United Kingdom in the production of all goods.Mutually beneficial trade is possible according to the principle of absolute advantage,but is impossible according to the principle of comparative advantage.

Adam Smith

Table 2.2.Output possibilities for South Korea and Japan -Referring to Table 2.2,the opportunity cost of one VCR in Japan is:

According to the principle of comparative advantage,specialization and trade increase a nation's total output since:

The principle of absolute advantage asserts that mutually beneficial trade can occur even if one nation is absolutely more efficient in the production of all goods.

Complete specialization usually occurs under the assumption of increasing opportunity costs.

Assume that Germany has higher labor productivity and higher wage levels than France.Germany can produce a commodity more cheaply than France if its productivity differential more than offsets its wage differential.

A nation benefits from international trade if it can achieve a higher indifference curve than it can in autarky.

Table 2.2.Output possibilities for South Korea and Japan -Referring to Table 2.2,the opportunity cost of one VCR in South Korea is:

Referring to Table 2.1,the opportunity cost of producing one ton of steel in the United States is:

John Stuart Mill's theory of reciprocal demand best applies when trading partners:

Referring to Table 2.1,the United Kingdom gains most from trade if:

Refer to Figure 2.1.If the relative cost of aluminum were to rise,then the production possibilities schedule would:

MacDougall's empirical study of comparative advantage was based on the notion that a product's labor cost is underlaid by labor productivity and the wage rate.