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1) In autarky the relative price of wine, in terms of beer, in Country B is ? a. 1W = 3B b. 1W = 4 1/2B c. 1W = 5B d. 1W = 6B
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2) Country A has an absolute advantage in ? a. Beer b. Wine c. Both products d. neither products
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3) If countries were to trade along the lines of comparative advantage ? a. A would export X to B b. A would export Y to B c. Neither country would want to trade d. None of the above
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4) Country B has an absolute advantage in ? a. Product X b. Product Y c. Neither X nor Y d. Both X and Y
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5) Comparative advantage is determined by ? a. actual differences in labor productivity between countries b. relative differences in labor productivity between countries c. Both (a) and (b) d. Neither (a) nor (b)
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6) In the classical model of Ricardo, the direction of trade is determined by ? a. Absolute advantage b. Comparative advantage c. Physical advantage d. Which way the wind blows
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7) The gains from international trade are closely related to ? a. The labor theory of value b. How much the autarky price differs from international terms of trade change c. The fact that a country must lose from trade d. All of the above
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8) Mercantilism ? a. Is the philosophy of free international trade? b. Was a system of export promotion and barriers to imports practiced by governments? c. Was praised by Adam Smith in the Wealth of Nations d. Both (a) and (c)
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9) If the international terms of trade settle at a level that is between each country’s opportunity cost ? a. There is no basis for gainful trade for either country b. Both countries gain from trade c. Only one country gains from trade d. One country gain and the other country loses from trade
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10) The earliest statement of the principle of comparative advantage is associated with ? a. Adam Smith b. David Ricardo c. Eli Heckscher d. Berti IOhlin
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