Questions and Answers
According to the text, which argument suggests that free trade exploits less productive countries?
What does the 'pauper labor argument' in free trade theory emphasize?
In the context of international trade, what is the main insight of the Ricardian model?
In the Ricardian model, what is the role of relative productivity in determining comparative advantage?
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What is one of the assumptions of the Ricardian model of international trade?
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Study Notes
Free Trade and Exploitation
- The argument that suggests free trade exploits less productive countries is the "pauper labor argument".
Pauper Labor Argument
- The pauper labor argument in free trade theory emphasizes that low-wage labor in developing countries is exploited by multinational corporations.
Ricardian Model
Main Insight
- The main insight of the Ricardian model in international trade is that countries should specialize in producing goods for which they have a comparative advantage.
Role of Relative Productivity
- In the Ricardian model, relative productivity plays a role in determining comparative advantage, as countries specialize in goods where their productivity is higher compared to other countries.
Assumptions of the Ricardian Model
- One of the assumptions of the Ricardian model of international trade is that there are only two goods and two countries.
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Description
Test your knowledge on the determinants and effects of free trade with this quiz based on the trade theory. Explore the motivations behind free trade and understand the arguments for and against it.
