International Economics, 8e (Krugman) Chapter 3 Labor Productivity and Comparative Advantage: The Ricardian Model3.1 The Concept of Comparative Advantage1) Trade between two countries can benefit both countries if A) each country exports that good in which it has a comparative advantage. B) each country enjoys superior terms of trade. C) each country has a more elastic demand for the imported goods. D) each country has a more elastic supply for the exported goods. E) Both C and D. Answer: A Question Status: Previous Edition2) 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 A) one B) two C) three D) four E) five Answer: D Question Status: Previous Edition3) A country engaging in trade according to the principles of comparative advantage gains from trade because it A) is producing exports indirectly more efficiently than it could alternatively. B) is producing imports indirectly more efficiently than it could domestically. C) is producing exports using fewer labor units. D) is producing imports indirectly using fewer labor units. E) None of the above. Answer: B Question Status: Previous Edition 4) Given the information in the table above, if it is ascertained that Foreign uses prison-slave labor to produce its exports, then home should A) export cloth. B) export widgets. C) export both and import nothing. D) export and import nothing. E) All of the above. Answer: A Question Status: Previous Edition 5) Given the information in the table above, if the Home economy suffered a meltdown, and the Unit Labor Requirements doubled to 30 for cloth and 60 for widgets then home should A) export cloth. B) export widgets. C) export both and import nothing. D) export and import nothing. E) All of the above. Answer: A Question Status: Previous Edition6) The earliest statement of the principle of comparative advantage is associated with A) David Hume. B) David Ricardo. C) Adam Smith. D) Eli Heckscher. E) Bertil Ohlin. Answer: B Question Status: Previous Edition7) The Gains from Trade associated with the principle of Comparative Advantage depends on A) the trade partners must differ in technology or tastes. B) there can be no more goods traded than the number of trade partners. C) there may be no more trade partners than goods traded. D) All of the above. E) None of the above. Answer: A Question Status: Previous Edition8) The Ricardian model demonstrates that A) trade between two countries will benefit both countries. B) trade between two countries may benefit both regardless of which good each exports. C) trade between two countries may benefit both if each exports the product in which it has a comparative advantage. D) trade between two countries may benefit one but harm the other. E) None of the above. Answer: C Question Status: New 3.2 A One-Factor Economy1) Given the following information:(a)What is the marginal cost of a toy in each country?(b)How might you demonstrate (quantitatively) that a country with absolute productivity advantage in a product may find that its production is more costly than in the other (unproductive) country?(c)Demonstrate the fact that trade produces imports (indirectly) cheaper, even in the relatively unproductive country. Answer: (a)3 units of Soy in the U.S., and 1 Soy unit in Croatia.(b)The U.S. have absolute productivity advantage in toys. Nevertheless, toys are three times more costly than they are in Croatia.(c)In Croatia, one unit of soy will cost one toy. However, if the terms of trade fall between the two autarkic price ratios (a condition necessary for both countries to enjoy gains from trade), say at 2 Soy units per toy, then Croatia will gain each Soy unit with less of a sacrifice of toy production. Question Status: Previous Edition3.3 Trade in a One-Factor World 1) Given the information in the table above A) neither country has a comparative advantage. B) Home has a comparative advantage in cloth. C) Foreign has a comparative advantage in cloth. D) Home has a comparative advantage in widgets. E) Home has a comparative advantage in both products. Answer: B Question Status: Previous Edition2) Given the information in the table above, if wages were to double in Home, then Home should A) export cloth. B) export widgets. C) export both and import nothing. D) export and import nothing.