Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

The price-specie-flow mechanism illustrated why one nation's gains from trade were accompanied by another country's losses.

The domestic cost ratios of nations set the outer limits to the equilibrium terms of trade.

A terms-of-trade index that equals 150 indicates that compared to the base year:

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:

All of the following may be exit barriers except

In Adam Smith's trade theory,______ is the only factor of production and is of one quality (homogeneous)

The Ricardian theory of comparative advantage could fully explain the distribution of the gains from trade among trading partners.

A nation realizes maximum gains from trade at the point where the international terms-of-trade line is tangent to its community indifference curve.

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

Assume that Canada has a comparative advantage in wheat and a comparative disadvantage in autos.As the Canadian demand for wheat increases,Canada's equilibrium terms of trade improves.

Figure 2.1.Production Possibilities Schedule -Refer to Figure 2.1.If the relative cost of steel were to rise,then the production possibilities schedule would:

A nation's trade triangle denotes its exports,imports,and terms of trade.

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

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

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 terms of trade is given by the prices:

Is it possible to add up the preferences of all consumers in an entire nation?

Adam Smith and David Ricardo reasoned that in a world of two countries,at least one country will be worse off as the result of trade.

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

The British economist,G.MacDougall compared the labor productivity ratios and export ratios for the United Kingdom and the United States in order to test