61. Who is the proponent of the theory of comparative advantage?
62. Palladia specializes in the production of beef and produces beef more efficiently than any
other country. It buys wheat, which it produces less efficiently than beef, from Rhodia, even
though it produces wheat more efficiently than Rhodia. Which of the following theories of
international trade support Palladia’s decision to buy wheat from Rhodia?
63. _____ suggests that consumers in all nations can consume more if there are no
restrictions on trade.
64. _____ suggests that trade is a positive-sum game in which all participating countries
fetch economic gains.
65. Argonia and Selenia have specialized in the production of industrial equipment and
pharmaceuticals respectively. Argonia exports industrial equipment to Selenia, which in turn
exports chemicals and medicines to Argonia. This mutually beneficial trade relationship best
illustrates _____.
66. Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice
while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging
in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable
land. This follows the theory of comparative advantage, and we can say that engaging in free
trade benefits all countries that participate in it. Which of the following is an inaccurate
assumption on which this conclusion is based?
67. _____ argued that in certain circumstances the theory of comparative advantage predicts
that a rich country might be worse off by switching to a free trade regime with a poor nation.
68. _____ means that the units of resources required to produce a good are assumed to
remain constant no matter where one is on a country’s production possibility frontier.
69. Diminishing returns to specialization occurs when:
70. It more realistic to assume diminishing returns to specialization when applying the theory
of comparative advantage to a simplified model with two nations because:
71. Which of the following is a reason for diminishing rather than constant returns to
specialization?
72. Dynamic gains in both the stock of a country’s resources and the efficiency with which
resources are utilized will:
73. Which of the following statements best indicates Samuelson’s criticism of free trade?
74. One of the rebuttals to Samuelson’s critique of the free trade model is that:
75. Which of the following is true of the relationship between trade and economic growth?
76. According to the Heckscher-Ohlin theory, the pattern of international trade is determined
by differences in _____.
77. Meitneria and Seaboria specialize in the production of heavy machinery and textiles
respectively. While Meitneria doesn’t produce textiles, Seaboria is not as technologically
advanced as Meitneria. In this situation, according to the Heckscher-Ohlin theory:
78. Nations have varying factor endowments, and different factor endowments explain
differences in _____.
79. The difference between Ricardo’s theory and the Heckscher-Ohlin theory is that the
Heckscher-Ohlin theory:
80. _____ predicts that countries will export those goods that make intensive use of factors
that are locally abundant, while importing goods that make intensive use of factors that are
locally scarce.