Question

21. In the neoclassical model of trade, the movement of a country from autarky to free trade generally results in specialization in production, the situation in the Classical model. a. complete; unlike b. complete; as was also c. partial; unlike d. partial; as was also 22. If two countries have identical production-possibilities frontiers but different tastes, it is possible for each country to gain from trade with the other country a. in the Classical model but not in the neoclassical model. b. in the neoclassical model but not in the Classical model. c. in both the Classical model and the neoclassical model. d. in neither the Classical model nor the neoclassical model.

Answer 1

21. In the neoclassical model of trade, the movement of a country from autarky to free trade generally results in partial specialization in production, unlike the situation in the Classical model.

22. If two countries have identical productiin-possibilities frontiers but different tastes, it is possible for each country to gain from trade with the other country

B. In the neoclassical model but not in the classical model.

According to neo classical theory two countries with identical production possibility frontier can benefit from trade but this does not hold true in classical theory. Different demand conditions in the two countries in the presence of increasing opportunity cost characterize this situation in the neoclassical theory.

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