326 test 1
Within each country that opens itself to international trade,
some factor owners gain, but other factor owners lose
For trade to take place, a country must face a world relative price that is
Different from the relative price that would prevail in the absence of trade
The graph to the right depicts a specific factors economy that produces two goods: cloth and food Assuming that the country is open to trade, at the lower relative price, (Pc / Pf)^1, the economy
Imports cloth and exports food
A country has comparative advantage in producing a good if
It's opportunity cost of producing that good is lower than elsewhere
According to the gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is
The distance between them
Assume a specific factors economy produces two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the y-axis When the price of cloth increases by 1% and the price of food does not change,
The marginal product of labor in the cloth sector falls.
In each sector of a specific factors economy, profit-maximizing employers will demand labor up to the point where
The marginal product of labor times the price of the product equals the wage rate
Although trade creates gains for some and losses for others, economists do not, generally, stress the income redistribution effects of international trade. Which of the following is NOT a reason why economists tend to de-emphasize the impact of international trade on the distribution of income?
Those that lose from trade tend to be marginally impacted by trade, poorly organized, and largely devoid of political influence.
In claiming that "size matters", the gravity model asserts that there is a strong empirical relationship between the size of a country's economy and the
Volume of its imports and exports
When opening up to trade, an economy
exports the good whose relative price has increased and imports the good whose relative price has decreased
The current process of increasing economic integration among national economies, better known as globalization
is actually the world's second wave of such integration.
An important insight of international trade theory is that when countries exchange goods and services one with the other, it
is usually beneficial to both countries