Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

a. people in Portugal will not want to buy as many hats.
b. Spain no longer has a comparative advantage in hats.
c. Portugal is flooding the market with too many doormats.
d. some of the gains from trade shift to Portugal.
e. some of the gains from trade shift to Spain.


d

Economics

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Fill in the blank(s) with the appropriate word(s).

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According to the infant industry argument for trade protectionism

A) new industries are capable of competing with established rivals. B) trade barriers must be used to protect domestic workers. C) new industries need to be shielded from competition in the early stages of learning by doing. D) tariffs imposed to aid new industries should never be removed.

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The Employment Act of 1946 was an outgrowth of the Great Depression.

a. true b. false

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