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Assume that the UK and Portugal have the same labor supply. Each hour, a UK worker can make 8 bottles of wine OR 20 pieces

Assume that the UK and Portugal have the same labor supply. Each hour, a UK worker can make 8 bottles of wine OR 20 pieces of cloth, while a worker in Portugal can make 5 bottles of wine OR 10 pieces of cloth. Which of the following is TRUE?

A. Trade would occur if the price of a bottle of wine was 2.2 pieces of cloth

B. In autarky, the UK price of 1 bottle of wine would be 2 pieces of cloth

C. The UK has absolute advantage both in cloth and wine

A and C, but not B

Which of the following is frequently associated with a period of rapid growth?

High rate of return on capital

High level of capital intensity

High depreciation rate

11.Ricardian trade has the following advantages, EXCEPT?

Increased employment

Increased consumption

Lower import prices

Increased productivity

11.Technological progress has which of the following effects?

Diminishing returns

An increase in the average rate of return to capital and labor

An increase in employment

not enough information

Economies A and B have two types of labor: low skilled and high skilled. Economy A has a larger endowment of low skilled labor relative to Economy B. Which of the following statements is most likely to be FALSE?

When economy C, which has endowments like A, enters trade, the wages of low skilled workers in A rise relative to those of high skilled workers in A

In trade with economy B, economy A exports the good that makes intensive use of low skilled labor

In economy A, the wages of high skilled workers are higher relative to those of low skilled workers in autarky than under trade with economy B

When economy D, which has endowments like B, enters trade, the wages of high skilled workers in A decline relative to those of low skilled workers in A

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