It is generally claimed that a movement from autarky to free trade consistent with Ricardian comparative advantage increases the economic welfare of each of the trade partners
However, it may be demonstrated that under certain circumstances, not everyone in each country is made better off. Illustrate such a case.
(a) If inter-generational, or economic growth considerations are taken into account, then a country may end up specializing in a good that has no or few growth linkages with the rest of the economy (e.g., an "enclave" sector).
(b) If some of the residents of a country have tastes biased toward their exportable, then they may suffer due to the trade-affected increase in the market price of the exportable good.
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If the working age population is 200 million, 150 million are employed, and 6 million are unemployed, the unemployment rate is
A) 3.0 percent. B) 25.0 percent. C) 4.0 percent. D) 12.0 percent. E) 3.8 percent.
Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. If the terms of trade are established as 1 ton of apples for 4 tons of oranges: a. there are no incentives
for Omega to engage in international specialization and trade with Alpha. b. it is in the interest of Omega to grow oranges and trade for apples. c. it is in the interest of both countries to specialize and trade with one another. d. there are no incentives for Alpha or Omega to specialize and trade with one another.
If average labor productivity in two countries is the same, average living standards will be higher in the country with:
A. the smaller population. B. the higher share of population employed. C. the lower share of population employed. D. the larger population.
The minimum efficient scale is the output at which the long-run average cost curve becomes horizontal.
Answer the following statement true (T) or false (F)