T f 14 compared to ricardian trade theory modern

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T F 14. Compared to Ricardian trade theory, modern trade theory provides a more general view of comparative advantage since it is based on all factors of production rather than just labor. T F 15. Constant opportunity costs suggest that the relative cost of producing one product in terms of the other will remain the same no matter where a nation chooses to locate on its production-possibilities schedule. T F 16. There are two explanations of constant opportunity costs: (1) factors of production are imperfect substitutes for each other; (2) all units of a given factor have different qualities. T F 17. With increasing opportunity costs, a nation totally specializes in the production of the commodity of its comparative advantage; with constant opportunity costs, a nation partially specializes in the production of the commodity of its comparative advantage. T F 18. A nation’s trade triangle denotes its exports, imports, and terms of trade. T F 19. International trade leads to increased welfare if a nation can achieve a post-trade consumption point lying inside of its production-possibilities schedule. 9
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Chapter 2: Foundations of Modern Trade Theory T F 20. If the U.S. post-trade consumption point lies along its production possibilities schedule, the United States achieves a higher level of welfare with trade than without trade. T F 21. If productivity in the German computer industry grows faster than it does in the Japanese computer industry, the opportunity cost of each computer produced in Japan increases relative to the opportunity cost of a computer produced in Germany. T F 22. If Japan loses competitiveness in computers, Japanese computer workers lose jobs to foreign computer workers and the wages of Japanese computer workers tend to fall relative to the wages of foreign computer workers. T F 23. With constant opportunity costs, a nation will achieve the greatest possible gains from trade if it partially specializes in the production of the commodity of its comparative disadvantage. T F 24. By reducing the overall volume of trade, import restrictions tend to reduce a nation’s gains from trade. T F 25. With increasing opportunity costs, comparative advantage depends on a nation’s supply conditions and demand conditions; with constant opportunity costs, comparative advantage depends only on demand conditions. T F 26. According to the principle of comparative advantage, an open trading system results in resources being channeled from uses of low productivity to those of high productivity. T F 27. The existence of exit barriers tends to delay the closing of inefficient firms that face international competitive disadvantages. T F 28. MacDougall’s empirical study of comparative advantage was based on the notion that a product’s labor cost is underlaid by labor productivity and the wage rate. T F 29. The MacDougall study of comparative advantage hypothesized that in those industries in which U.S. labor productivity was relatively high, U.S. exports to the world should be lower than U.K.
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