Question 1 Do you agree or disagree that trade with a low-wage country (e.g. China) can undermine

the competitiveness of the Canadian economy and thus should be restricted? Explain.

Question 2

Suppose a reduction in trade costs raises Canadian imports of cars from the U.S. as well as exports of agricultural goods to the U.S. Explain how this reduction in trade costs will aect auto industry workers in Canada.

Question 3

How does trade aect real return to a factor of production which can freely move across industries?

Question 4

Why do countries export goods in which they have comparative advantage?

Question 5

If openness to trade does not aect relative prices at home, explain how does trade aect real wages at home?

Question 6

Explain two dierent ways in which we can illustrate gains from trade.

Question 7

Explain why in the specic factors model production technologies have diminishing return to scale.

Question 8

Explain how equilibrium relative prices are formed in the Ricardian model without trade.

Question 9

Explain why the real return on the factor of production, which is specic to exporting industry, goes up in the presence of international trade?

Question 10

Explain how the assumption of the constant return to scale is used in the Ricardian model.