Question 1

Suppose that workers in A can produce 1 unit of S in 3 hours and 1 unit of T in 9 hours. Suppose that the relative price of S in B is 2. Graph the PPF for country A. Indicate the exact slope of the PPF. Show how the autarky equilibrium is determined. Illustrate a hypothetical international trade equilibrium, including production and consumption points, and trade volumes for a given (your assumption-be explicit) but permissible value of the international terms of trade.

Accepted Answer

The answer of Suppose that workers in A can produce...

Question 2

A country in autarky does not trade.

Accepted Answer

Autarky is a situation when a country does not engage in international trade and focuses on producing all goods and services domestically.

Question 3

Can a country have comparative advantage in all products?

Accepted Answer

The answer of Can a country have comparative advantage in...

Question 4

Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium.

Accepted Answer

The answer of Starting from a situation where country A...

Question 5

Adam Smith was an American economist that published The Wealth of Nations, one of the most important books in the history of economic thought.

Accepted Answer

Adam Smith was a Scottish economist, not an American economist.

Question 6

Mercantilism is another name given to the version of capitalism that has emerged in the globalized world of the 21st century.

Accepted Answer

Mercantilism is an economic theory and practice that was dominant in Europe from the 16th to the 18th century. It is characterized by a focus on achieving a favorable balance of trade through government intervention, protectionism, and the accumulation of gold and silver reserves. It is not a name given to the version of capitalism in the 21st century.

Quiz 3: The Classical Model of International Trade

A country in autarky does not trade.

Can a country have comparative advantage in all products?

Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium.

Adam Smith was an American economist that published The Wealth of Nations, one of the most important books in the history of economic thought.

Mercantilism is another name given to the version of capitalism that has emerged in the globalized world of the 21st century.