QUESTION According to Adam Smith, countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries. Indicate whether the statement is true or false. ANSWER TRUE According to Adam Smith, countries should specialize in the production of goods for which […]
QUESTION According to Ricardo’s theory of comparative advantage, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently. Indicate whether the statement is true or false. ANSWER TRUE According to Ricardo’s theory of comparative advantage, it […]
QUESTION Ricardo’s theory of comparative advantage is a major intellectual weapon for advocates of free trade because it provides a strong rationale for encouraging free trade. Indicate whether the statement is true or false. ANSWER TRUE Ricardo’s theory of comparative advantage provides a strong rationale for encouraging free trade and is powerful enough to […]
QUESTION Free trade is likely to increase a country’s stock of resources and the efficiency with which it utilizes those resources. Indicate whether the statement is true or false. ANSWER TRUE Opening an economy to trade is likely to generate dynamic gains of two sorts. First, free trade might increase a country’s stock of […]
QUESTION Mercantilism, propagated in the sixteenth and seventeenth centuries, advocated that countries should simultaneously encourage both imports and exports. Indicate whether the statement is true or false. ANSWER FALSE Propagated in the sixteenth and seventeenth centuries, mercantilism advocated that countries should simultaneously encourage exports and discourage imports.
QUESTION The Nobel Prize-winning economist Paul Samuelson argued that contrary to the standard interpretation, in certain circumstances the theory of comparative advantage predicts that a rich country might actually be worse off by switching to a free trade regime with a poor nation. Indicate whether the statement is true or false. ANSWER TRUE Nobel […]
QUESTION David Ricardo’s theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country. Indicate whether the statement is true or false. ANSWER FALSE Proposed in 1776, Adam Smith’s theory of absolute advantage was the first to explain why free trade is beneficial to a country.
QUESTION A certain amount of friction is involved when resources are required to move from one economic activity to another. Indicate whether the statement is true or false. ANSWER TRUE Resources do not always shift quite easily from one economic activity to another. The process creates friction and human suffering too.
QUESTION Businesses can make sure that they are hiring individuals with strong personal ethics by: A. employing only those people who have a very high intelligence quotient. B. administering simple tests that indicate analytical skills of a prospective employee. C. asking for letters of reference from the prospective employees. D. hiring only those people who […]
QUESTION The code of ethics of a company draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy. In the context of this information, this company is most likely to: A. restrict its employees from joining a trade union. B. […]
