Q. Which of the following is true?
✅ Correct Answer: (B)
Countries that open up for trade see their wages rise over time relative to U.S. wages.
International Economics MCQs and Notes
Q. In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:
✅ Correct Answer: (B)
Relative demand and relative supply on the world market.
Q. Country A and Country B produce computers and Web sites. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 At which of the following relative prices (computers in terms of Web sites) will Country B produce both goods under free trade?
✅ Correct Answer: (C)
100
Q. Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:
✅ Correct Answer: (A)
(or 1/100)
Q. Which of the following is NOT an assumption in the Ricardian model?
✅ Correct Answer: (Each count)
Q. The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade?
✅ Correct Answer: (D)
Country A will export Web pages and import computers.
Q. Country A has 5000 units of labor. It takes 50 units of labor to produce one computer and 1 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers?
✅ Correct Answer: (D)
0.02
Q. The Ricardian model exhibits gains from trade:
✅ Correct Answer: (B)
For both trading countries.
Q. In the Ricardian model:
✅ Correct Answer: (C)
There is only one factor of production.
Q. Gross domestic product measures
✅ Correct Answer: (D)
the total value of all final goods and services produced within an economy.