7 Written questions
6 Multiple choice questions
- 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.
- Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
- the situation where a country has a high capital-to-labor ratio relative to another country.
- 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.
- A corporation's purchase of real assets, such as production facilities and equipment, in a foreign country.
- A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
6 True/False questions
The Heckschler-Ohlin Model → A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
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.
The Stolper-Samuelson Theory → A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
Explanations for Intra-industry trade → Occurs when a country imports and exports the same good.
Comparative Advantage → A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
Dynamic Gains from Trade → are demonstrated by showing that each country moves to a higher CIC. OR, by showing that both countries can have higher levels of consumption of both goods.