QUESTION 17

Assume two large countries, the U.S. and China. U.S. total surplus from trade (producer, consumer and government) will be greatest when

	a.	the U.S. enacts tariffs but China does not
	b.	China enacts tariffs but the U.S. does not
	c.	Both countries enact tariffs
	d.	Neither country enacts tariffs

QUESTION 18

Optimal production in the specific factors model occurs where the ratio of the marginal product of good A to the marginal product of good B (MPLa/MPLb) is equal to

	a.	the wage in industry A divided by the wage in industry B (Wa/Wb)
	b.	the wage industry B divided by the wage in industry A (Wb/Wa)
	c.	the price of good A divided by the price of good B (Pa/Pb)
	d.	the price of good B divided by the price of good A (Pb/Pa)

QUESTION 19

Trade is beneficial in the Ricardian model because

	a.	Trade allows companies to sell to a larger market, creating economies of scale and lower costs of production
	b.	Trade results in technology transfer from foreign firms, shifting the production possibilities frontier outwards
	c.	Trade creates increased competiition for domestic firms, resulting in greater productivitiy
	d.	Trade results in a better allocation of resources between two industries, expanding world output

QUESTION 20

Assume that there are two goods, food and cloth and that trade increases the relative price of cloth. Home's consumption of food in either the specific factors or Heckscher-Ohlin model will

	a.	increase
	b.	decrease
	c.	remain unchanged
	d.	may either increase or decrease