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Discuss why Ricardo's cost comparative theory explains the current trade pattern between the developing and developed countries better than Smith's absolute advantage theory.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

1. When a nation's terms of trade worsens:

a. The nation has to stop trading with other nations.

b. The nation should only be engaged in importing.

c. The nation should increase its exports.

d. The nation has to order its citizens not to purchase imported products.

e. None of the above is a solution.

2. Ricardo's theory unlike Smith's theory, is based on the assumption that costs of production change with the level of production. True or false?

3. As the world is becoming "flat", the relevance of absolute cost advantage in international trade:

a. Becomes embolden.

b. Diminishes.

c. Becomes applicable to developed countries.

d. None of the above choices is correct.

e. Only implies to developing countries.

Mention if the following statements are true or false. Explain clearly why, using ideas and concepts.

a. Under free trade, one country gains at the expense of the other.

b. The theory of comparative advantage states that free trade benefits all countries.

c. The Neo-classical trade theory states that trade arises due to different amounts of labor and capital in a country.

d. The H-O theory states that trade arises due to different PPFs in a country.

e. Under free trade, prices fall, so trade becomes easier.

f. A country should not have any imports and should increase exports if it wants to increase its employment levels.

g. Adam Smith recommended very strong government regulation of trade.

h. A country with higher labor productivity than another country will have a comparative advantage in the production of all goods.

i. The Theory of absolute advantage explains producer and consumer equilibriums under free trade.

j. Developed countries do not gain under free trade with developing countries.

Production per unit of labor hour UK US Wheat 6 1 Furniture 6 3 1. Which country has absolute advantage in the production of Wheat, of Furniture? 2. According to the absolute advantage theory which country will export Wheat?: 3. According to the comparative advantage theory how much is the opportunity cost of Wheat production in UK and in US? 4. According to the comparative advantage theory how much is the opportunity cost of Furniture production in UK and in US? 5. When trade opens according to the comparative advantage theory which country will export wheat? Why? 6. When trade opens according to the comparative advantage theory which country will export Furniture? Why? 7. At autarky price (before trade) what are the relative prices (domestic cost ratios) in UK? 8. At autarky price (before trade) what are the relative prices (domestic cost ratios) in US? 9. If trade between them take place at terms of trade of 1 W for 2 F why each country benefits from trade? Explain.

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