One of the predictions of the HO model is that
A) countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other.
B) countries will tend to specialize, but not completely, in their comparative advantage good.
C) reciprocal demand leads to an equilibrium terms of trade by inducing changes in both demand and supply.
D) All of the above.
D
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The figure above shows the market for milk. If 100 gallons of milk a day are available, the ________ price that consumers are willing to pay for the last gallon is ________
A) maximum; $2.50 B) minimum; $3.00 C) maximum; $4.00 D) minimum; $4.00
One way to reduce exports is to
A) base trade on comparative advantage. B) base trade on opportunity costs. C) trade with poor countries. D) restrict imports.