Exam 3: Labor Productivity and Comparative Advantage: the Ricardian Model

Let us define the real wage as the purchasing power of one hour of labor. In the Ricardian 2X2 model, if two countries under autarky engage in trade then

The Ricardian proposition that international trade will benefit any country ("gains from trade") as long as the world terms of trade do not equal its autarkic relative prices is a straightforward and powerful concept. Nevertheless, it is impossible to demonstrate empirically. Why?

Suppose the United states production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis. We now learn that the German wage doubles, but U.S. wages do not change at all. We now know that

If two countries engage in Free Trade following the principles of comparative advantage, then

-Given the information in the table above. If these two countries trade these two goods with each other in context of the Ricardian model of comparative advantage, what is the lower limit for the price of cloth?

Which of the following is most likely to be an untraded good in a Ricardian two-country, multi-good model?

In a two product two country world, international trade can lead to increases in

In the Ricardian model, if a country's trade is restricted, this will cause all EXCEPT which?

In a two-country, two-product world, the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to

If a very small country trades with a very large country according to the Ricardian model, then

Given the information in the table above

Use the information in the table below to answer the following questions. (a) Does either country have an absolute advantage in the production of wheat or beef? Explain. (b) What is the opportunity cost of wheat in each country? (c) What is the opportunity cost of beef in each country? (d) Analyze comparative advantage and opportunities for trade between the U.S. and Argentina.

Which of the following statements is TRUE?

The two-country, multi-product model differs from the two-country, two-product model in that, in the former

If a production possibilities frontier is bowed out (concave to the origin), then production occurs under conditions of

-Given the information in the table above. If these two countries trade these two goods in the context of the Ricardian model of comparative advantage, then what is the lower limit of the world equilibrium price of widgets?

The Country of Rhozundia is blessed with rich copper deposits. The cost of copper produced (relative to the cost of widgets produced) is therefore very low. From this information we know that

The Ricardian model demonstrates that

As a result of trade between two countries which are of completely different economic sizes, specialization in the Ricardian 2X2 model tends to

Given the information in the table above