Economic Shocks and Relative Prices Quiz

What is the Law of Comparative Advantage?

In terms of the Ricardian Model, what does CA stand for?

What is the main reason for gains from trade according to the text?

Who is considered the admirer of Adam Smith's The Wealth of Nations?

Which country has a Comparative Advantage in producing computers according to the text?

What does the Ricardian Model assume about factors of production?

In terms of opportunity cost, what does it mean if a country has a high opportunity cost of producing a good?

In terms of homothetic preferences, what happens to a consumer's consumption when their income increases by a certain percentage?

What is the main reason for nations exporting goods that are relatively cheap in autarky?

What does the US have an absolute advantage in producing?

In the Ricardian model, what assumption is made about the technology in two industries within a country?

What factor is assumed to be the only one that can freely move between industries in the Ricardian model?

What happens to wages in an industry if there is an increased labor supply according to the Ricardian model?

Under free trade equilibrium, what outcome would occur if the relative price is equal to the labor ratio in another country's autarky?

What does full specialization entail in the context of international trade?

What outcomes does the Ricardian model consider as endogenous?

'Gains from trade' in the context of specialization can be demonstrated by what change in real wages?

'Comparative statics' in economics refers to analyzing:

'Positive demand shock' for one good would likely result in:

What effect can a positive demand shock for a particular good have on its price relative to other goods?

What potential impact does improved technology have on the production costs of a good relative to another?

What is the new relative price level for shirts in China after advancing its technology?

How did the technological advancement in computers impact the comparative advantage of the US and China?

In the context of comparative advantage, which economy should export goods with relatively low autarky prices?

What gains can be achieved from trade beyond what is captured by traditional models like Ricardo's theory?

In terms of opportunity cost, which country has a comparative advantage in producing cars between the US and Mexico?

What would be the US workers' opportunity cost of producing one car?

What would be Mexico's opportunity cost of producing one shirt?

What is Mexico's opportunity cost of producing one car in terms of shirts?