In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:

Related MCQs

• Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:
• As opposed to the Ricardian model of comparative advantage, the assumption of diminishing returns in the Heckscher-Ohlin model means that the probability is greater that with trade
• “Free trade between two countries in H O model will equalize relative factor prices provided there is incomplete specialization.” This is
• According to the Heckscher - Ohlin model, if the United States is richly endowed in human capital relative to Mexico, then as NAFTA increasingly leads to more bilateral free trade between the two countries,
• As a result of trade, specialization in the Ricardian model tends to be
• A nation engaging in trade according to the Ricardian model will find its consumption bundle
• In the Ricardian model, if a country's trade is restricted, this will cause all except which?
• The Ricardian model exhibits gains from trade:
• The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade?
• The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former