Q1. Incomplete specialization means....
A) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level equal to 0
B) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is unknown
C) ...that, after opening up to trade, production is decreased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level greater than 0
D) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level greater than 0
Q2. After opening to trade with Country B, if Country A is relatively labor abundant - following the logic of the Stolper-Samuelson theorem...
A)Country A will close its borders
B)wages will fall in A, and will increase in B
C)The rental rate of capital will increase in A
D)wages will fall in B, and will increase in A
Q1. Incomplete specialization means....
A) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level equal to 0
B) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is unknown
C) ...that, after opening up to trade, production is decreased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level greater than 0
D) ...that, after opening up to trade, production is increased in the good where a Country has a comparative advantage, and the production of the good in which the Country has a comparative disadvantage is decreased to a level greater than 0
Q2. After opening to trade with Country B, if Country A is relatively labor abundant - following the logic of the Stolper-Samuelson theorem...
A)Country A will close its borders
B)wages will fall in A, and will increase in B
C)The rental rate of capital will increase in A
D)wages will fall in B, and will increase in A
Related textbook solutions
Related questions
Consider the following production data for England and Portugal.
| England | Portugal | |
| Labor force | 25 | 200 |
| Number of bottles of wine | ||
| per worker | 40 | 50 |
| Number of wheels of cheese | ||
| per worker | 4 | 1 |
(a) Which country has an absolute advantage in the production of each good? Which country
has a comparative advantage in the production of each good?
(b) Suppose prices/wages are in terms of wine. Assuming each country spends 50% income on cheese and 50% on wine, with no trade, what is the wage and price of cheese in
each country? What is the total production of wine and cheese in each country?
(c) Suppose each country specializes in their comparative advantage good. After trade, what is the total global production of each good?
1. If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.
Is the statement true or false?
2. When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that:
| a. |
The domestic price will fall after trade opens up. |
|
| b. |
The total surplus for this good will increase as a result of opening up the market to international trade. |
|
| c. |
Opening the market to international trade will create a deadweight loss. |
|
| d. |
Both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade. |
