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ECON 440 Exam 1 Questions And Answers 2024/2025 Update
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ECON 440 Exam 1 Questions And Answers 2024/2025 Update
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ECON 440 Exam 1 Questions And Answers2024/2025 Update
Gravity Model Answer: 1. Countries tend to trade with nearby economies.
2. Trade is proportional to country size.
The earliest statement of the principle of comparative advantage is associated with Answer: David
Ricardo
Ricardian Model of Trade Answer: If two countries capable of producing two commodities engage in
the free market, then each country will increase its overall consumption by exporting the good for which
it has a comparative advantage while importing the other good, provided that there exist differences in
labor productivity between both countries
Absolute Advantage Answer: Whichever country has the lower unit labor requirement for that
specific good.
In the Ricardian model, trade between two countries can benefit both countries if Answer: each
country exports that good in which it has a comparative advantage.
The Ricardian model attributes the gains from trade associated with the principle of comparative
advantage to Answer: differences in labor productivity.
The Ricardian model demonstrates that Answer: trade between two countries may benefit both if
each exports the product in which it has a comparative advantage.
In order to know whether a country has a comparative advantage in the production of one particular
product we need information on at least ________ unit labor requirements. Answer: four
, A nation engaging in trade according to the Ricardian model will find its consumption bundle Answer:
outside its production possibilities frontier.
According to Ricardo, a country will have a comparative advantage in the product in which its Answer:
labor productivity is relatively high.
Assume that labor is the only factor of production and that wages in the United States equal $20 per
hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as
compared to Japan if Answer: U.S. labor productivity equaled 40 units per hour and Japan's 15 units
per hour.
Which of the following circumstances would make US companies less likely to move production to
China? Answer: US labor productivity increases
If a production possibilities frontier is a straight line, then production occurs under conditions of
Answer: constant opportunity costs.
Mahatma Gandhi exhorted his followers in India to promote economic welfare by decreasing imports.
This approach Answer: is not consistent with the Ricardian model of comparative advantage.
The Country of Rhozundia is blessed with rich copper deposits. The cost of copper produced (relative to
the cost of widgets produced) is therefore very low. From this information we know that Answer:
Rhozundia may or may not have a comparative advantage in copper.
We know that in antiquity, China exported silk because no one in any other country knew how to
produce this product. From this information we know that Answer: China had a comparative
advantage in silk.
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