Exam 34: International Trade and Comparative Advantage

David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity.Ricardo's discovery is called the law of

"I oppose a free trade agreement with Mexico because American workers will lose jobs to low-paid Mexican workers." Explain whether you agree or disagree with this statement.

Suppose the South had won the Civil War, and trade no longer took place between Northern and Southern states.Explain whether the sum of the North and South GDPs would have been higher or lower than with the current United States.

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total (world) output?

If South Korea has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

The effect of opening trade between countries is

In discussing trade, it is ____ that matters rather than ____.

If a nation has an absolute advantage in the production of a good,

Tariffs are different from quotas because they

By tradition, Japanese employers cannot "lay off" workers.As a result they have goods that they cannot sell on the domestic market without driving down prices.To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan.This is called

Variability in exchange rates of currencies used in international trade

Both tariffs and quotas will restrict supplies coming into the country from abroad.

Absolute advantage is a comparison among producers based on productivity.

If every country uses tariffs, everyone is likely to lose.

The infant industry argument is valid when