Question

1. Evaluate the following two statements. (1) The Ricardian model predicts wages across countries are correlated with labor productivity differences. (2) In the data, there is a correlation between wages and productivity at the national level.

A. Both are true

B. Both are false

C. (1) Is false and (2) is true

D. (1) is true and (2) is false

2. Does the Ricardian model imply that it is bad to trade with low wage countries?

A. Yes, lower prices will not benefit high wage countries

B. Yes, trade with low-wage countries will translate to lower wages at home.

C. No, rich countries only sometimes lose when trading with poor countries.

D. No, wages at home are reflective of the home country’s labor productivity.

E. (A) and (B) are true