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TRUE or FALSE. If the statement is correct write TRUE on your answer sheet. If the statement incorrect write FALSE on your answer sheet. EXPLAIN WHY YOUR ANSWER IS TRUE 0R FALSE. 5. In the Ricardian model of international trade, a country will fully specialize in a product since domestic prices are based on the labor theory of value. a. If the MRT of country A in a neo-ciassical model of international trade is MfoMCy = - 6.77 and the international terms of trade is (Pfoy)w = -7.0, for country A to be efcient it will increase its production of product Y and as a result its MRT will decline. 7. When the MRTS = - 370 between L and K while the relative price of productive inputs is FUN: = - 300. the use of resources is not optimal because there is an over employment ofcapnaL u. If the international terms of trade are (Px/Py)w = -2.5 and the marginal rate of substitution of country A is MUx/MUy = -2, there is an underconsumption of product Y and the Country A should export more product X and import more product Y