In the Ricardian model, the world relative supply curve has horizontal and vertical segments based on the relative marginal productivity between the two goods for each country. When world relative demand crosses relative supply at the vertical segment means the relative price is between the marginal productivities of the two countries. Hence, both countries will trade in their specialized goods.
the correct option is (b)
Verizon LTE 33%).о. 10:25 PM 2 ๑ Question Supply curve Unanswered In the Ricardian model, if...
In the Ricardian model, if the world relative demand curve crosses the world relative supply curve at the vertical segment, then A the countries will not trade. B both countries will completely specialize. C both countries will incompletely specialize. D one country will completely specialize and the other will incompletely specialize.
.ייי Verizon LTE 10:25 PM 33%).о. Question 2 Absolute advantage Unanswered Absolute advantage is most important for the determination of A the pattern of trade B the relative wage C the world relative price. D the shape of the PPF. Unanswered
Verizon LTE 33% 10:25 PM Question 2 Trade and production in the specific factors model Unanswered In autarky, the opportunity cost of wine in the U.S. is 4 beers and in Mexico is 8 beers. If there are increasing opportunity costs (as in the specific factors model), then after opening to trade the U.S. wil A fully specialize in and export wine. B fully specialize in and export beer. C produce both goods and export wine. D produce both goods...
ll Verizon LTE 33%).о. 10:25 PM 2 Question Opportunity costs and trade Unanswered Suppose producing a unit of good A requires2 hours of labor and producing a unit of good B requires 4 hours of labor. The opportunity cost of good A is If the world relative price of good A is 1, then this country will export 1/2 unit of good B: good A B 1/2 unit of good B; good B C 2 units of good B; good...
Verizon LTE 33%).о. 10:25 PM Question 2 Gravity model Unanswered Which is a significant explanation for the general success of the gravity model? Large economies have relatively larger A areas, which raises the probability that a productive activity will take place within the borders of that country. Large economies tend to avoid trading with small economies. Large economies tend to have large incomes and tend to spend more on imports Unanswered
Verizon LTE 33% 10:25 PM Question 2 Trade and factor returns Unanswered Consider a specific factors model in which capital is specific to manufacturing and land is specific to agriculture. If a country has a comparative advantage in manufacturing output, then when it opens to trade owners of land will beoff because the marginal product of land will . A better, rise B better; fall C worse; rise D worse; fall Unanswered
Verizon LTE 8:57 PM Question 2 Trade policies Unanswered Which statement is false? A large country never gains from imposing an export subsidy. A small country never gains from imposing an export subsidy. A large country never gains from imposing an import tariff. A small country never gains from imposing an import tariff. Unanswered
Question 1 Use the 2-country Ricardian model with free trade (graphically, using standard graphs) to work out the effects of the following changes (one at a time) on the Home and Foreign terms of trade and welfare. Assume that two goods, Food and Cloth, are produced and consumed, Home country has a comparative advantage in Food, and that in the initial equilibrium, both countries specialize completely. Assume that preferences are identical and homothetic in the two countries. (a) A decrease...
10 ( 1JW al questions) 01. (20 marks) Assume a Ricardian model. Home needs 3 units of labour to pro food and 2 units of labour to produce a unit of cloth home needs 3 units of labour to produce a unit of units of labour to produce a unit of clothes. The foreign country needs 3 unit of labour to produce a unit of food and 1 unit of labou oduce a unit of food and 1 unit of...
This question relates to the Ricardian Trade Model. Suppose costs of production depend only on labor costs, and that to produce a unit of each commodity in each country takes the number of labor hours shown. Good aLi aLi* Wheat 2 2 Soybeans 3 5 Cotton 2 4 Avocados 6 4 Percorino (Cheese) 12 3 a. Suppose the wage ratio, w/w* = 1.25. Which goods does the home country produce? Which goods does the foreign country produce? Explain clearly how...