Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

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

The theory of reciprocal demand asserts that as the U.S.demand for Canadian wheat rises,the equilibrium terms of trade improve for the United States.

If a production possibilities curve is bowed out (i.e.,concave)in appearance,production occurs under conditions of:

The trading principle formulated by Adam Smith maintained that:

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

If the international terms of trade lies beneath (inside)the Mexican cost ratio,Mexico is worse off with trade than without trade.

Concerning international trade restrictions,which of the following is false? Trade restrictions:

Constant opportunity costs suggest that the relative cost of producing one product in terms of the other will remain the same no matter where a nation chooses to locate on its production-possibilities schedule.

Ricardo's theory of comparative advantage was of limited relevance to the real world since it assumed that labor was only one of several factors of production.

The MacDougall study of comparative advantage hypothesized that in those industries in which U.S.labor productivity was relatively high,U.S.exports to the world should be lower than U.K.exports to the world,after adjusting for wage differentials.

"The equilibrium relative commodity price at which trade takes place is determined by the conditions of demand and supply for each commodity in both nations.Other things being equal,the nation with the more intense demand for the other nation's exported good will gain less from trade than the nation with the less intense demand." This statement was first proposed by:

When a nation achieves autarky equilibrium:

When a nation requires fewer resources than another nation to produce a product,the nation is said to have a:

Unlike Adam Smith,David Ricardo's trading principle emphasizes the:

Figure 2.2 illustrates trade data for Canada. The figure assumes that Canada attains international trade equilibrium at point C. Figure 2.2. Canadian Trade Possibilities -Consider Figure 2.2.In the absence of trade,Canada would produce and consume:

Which of the following terms-of-trade concepts is calculated by dividing the change in a country's export price index by the change in its import price index between two points in time,multiplied by 100 to express the terms of trade in percentages?

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

Table 2.3. Terms of Trade -Referring to Table 2.3,which countries' terms of trade worsened between 1990 and 2004?

The expression "importance of being unimportant" suggests that if one nation is much larger than the other,the larger nation realizes most of the gains from trade while the smaller nation realizes fewer gains from trade.

Figure 2.2 illustrates trade data for Canada. The figure assumes that Canada attains international trade equilibrium at point C. Figure 2.2. Canadian Trade Possibilities -Consider Figure 2.2.With trade,Canada consumes: