ECO201 - CHAPTER 4

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?

• Imports are only restricted when foreign-made goods do not meet domestic standards of quality.

  
  

• Import restrictions are the result of trade wars between hostile countries.

• Trade can have substantial effects on a country's distribution of income.

• The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial.

The Ricardian two-country two-good model predicts that there are potential benefits from trade, but NOT

• when one country has significantly lower wages than the other country.

  
  

• the mechanism that determines which country will specialize in which good.

  
  

• when both countries have the same types of technology available.

• the effect of trade on income distribution.

  
  

International trade can have important effects on the distribution of income because

• different countries use different currencies.
  

• some resources are immobile in the short run.

• of government corruption.

• the more powerful country dictates the terms of trade.

International trade can have important effects on the distribution of income because

• different industries employ different factors of production.

  
  

• different countries use different currencies.

  
  

• rich countries take advantage of poor countries.

  
  

• the more powerful country dictates the terms of trade.

  
  

In the specific factors model, labor is defined as a(an)

• mobile factor.

  
  

• fixed factor.

  
  

• specific factor.

  
  

• variable factor.

  
  

In the specific factors model, which of the following is treated as a specific factor?

• land

• cloth

• food

• labor

In the specific factors model, which of the following is treated as a specific factor?

• labor

• cloth

• food

• capital

A factor of production that cannot be used outside of a particular sector of an economy is a(an)

• specific factor.

  
  

• mobile factor.

  
  

• variable factor.

  
  

• import-competing factor.

  
  

A factor of production that can be used in any sector of an economy is a(an)

• mobile factor.

  
  

• 
  import-competing factor.

  
  

• specifice factor

• factor of production

The specific factors model assumes that there are ________ goods and ________ factor(s) of production.

• 2 ; 3

• 2; 2

• 1; 2

• 1; 1