A fall in the price of imports or a rise in the price of exports will:
A. Improve the terms of trade
B. Worsen the terms of trade
C. Expand the production possibilities curve
D. Contract the production possibilities curve
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Under free trade, Canada would not enjoy any gains from trade with Sweden if Canada:
A. trades atthe Canadian rate of transformation
B. Trades at Sweden's rate of transformation
C. Specializes completely in the production of its export good
D. Specializes partially in the production of its export good
Concerning possible determinants of international trade, which are sources of comparative advantage? Differences in:
A. Methods of production
B. Tastes and preferences
C. Technological know-how
D. All of the above
Ricardo's model of comparative advantage assumed all of the following except:
A. In each nation, labor is the only input
B. Costs do not vary with the level of production
C. Rerfect competition prevails in all markets
D. Transportation costs rise as distance increases between countries
Ricardo's model of comparative advantage assumed all of the following except:
A. Trade is balanced, thus ruling out flows of money between nations
B. Firms make production decisions in an attempt to maximize profits
C. Free trade occurs between nations
D. Labor is immobile within a country, but is incapable of moving between countries
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