Which of the following statements correctly describes international trade in accordance with comparative advantage?
a. Trade is impossible unless there exists a purely competitive market for foreign exchange.
b. Trade makes all the citizens of the trading countries better off, which is a clear example of a Pareto improvement.
c. Trade may well make some citizens in each trading country worse off.
d. Trade requires the judicious application by government of tariffs and quotas in order to discourage production according to comparative disadvantage.
e. Trade requires that the economies of the trading partners be of roughly equal size (United States versus Andorra just does not work).
C
You might also like to view...
Refer to the figure above. This country's imports equal
A) CE units of X. B) GH units of Y. C) CD units of X. D) DE units of Y.
Suppose that Brazil is capital abundant and Chile is natural resource abundant. If timber is natural resource intensive and computers are capital intensive, then according to the Stolper-Samuelson Theorem, the incomes of the owners of ________ are likely to rise in Brazil after trade with Chile begins.
A) capital B) labor C) natural resources D) It is impossible to determine which will be favored.