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Unformatted text preview: EXERCISE 4 1. The ratio of a countrys average export price to its average import price is a. its absolute advantage. b. its comparative advantage. c. its terms of trade. d. its exchange rate. Answer: C 2. According to the Prebisch-Singer thesis a. demand for primary products has steadily fallen. b. profits of primary producers have steadily fallen. c. primary producers terms of trade have steadily fallen. d. prices of primary products have risen over time. Answer: C 3. Which of the following is an argument in favor of limiting free trade? a. Cheaper capital goods b. Declining terms of trade c. Decreased losses from rent-seeking activities d. All of the above e. None of the above Answer: B 4. The existence of increasing returns to scale in the manufacturing sectors of many rich countries, implies that a. taking advantage of trade is relatively difficult for poor nations that want to export manufacturing products b. taking advantage of trade is relatively easy for poor nations that want to export manufacturing b....
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