7 Written questions
6 Multiple choice questions
- A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
- Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
- Dissimilar good with different factor intensities are lumped together in trade statistics.
- the smaller of two trading economies receives the greatest gains from trade.
Trade benefits both trading countries
Gains due to differences in absolute advantage between countries.
- The ratio of a country's exports divided by its GDP.
- As new products mature, comparative advantage shifts from one country to another. New products are intensive in highly skilled workers (inventors, engineers), giving highly educated countries a comparative advantage. As a product matures large scale production takes over, favoring capital abundant countries. Finally, production becomes routine, and labor abundant countries have the comparative advantage.
6 True/False questions
Absolute Advantage → A country has a comparative advantage in the production of a good if the relative cost (opportunity cost) of producing that good is lower than that of its trading partner.
Dynamic Gains from Trade → The gains from trade that occur over time because trade causes an increase in a country's economic growth or induces greater efficiency in the use of existing resources.
Adam Smith's Wealth of Nations → Wealth depends on productive capacity
Foreign Direct Investment (FDI) → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
Portfolio Investment → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
Intra-industry trade → Occurs when a country imports and exports the same good.