A hidden cost fallacy can be avoided
a. by ignoring the opportunity costs to using a capital
b. by ignoring the cost of capital
c. by taking all capital costs into account including the cost of equity
d. none of the above
c
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When income levels in the home nation increase, what is the effect on the home TB?
a. It decreases because of expenditure switching. b. It decreases because of an increase in imports. c. It increases because of an increase in exports. d. It increases because of expenditure switching.
The assumption of diminishing returns in the Heckscher-Ohlin model means that, unlike in the Ricardian model, it is likely that
A) countries will not be fully specialized in one product. B) countries will benefit from free international trade. C) countries will consume outside their production possibility frontier. D) comparative advantage will not determine the direction of trade. E) global production will decrease under trade.